Answer
To estimate a cost function based on past data, you go through six steps: 1. Choose the cost you want to predict (dependent variable). 2. Find the cost driver (independent variable). 3. Collect data on both. 4. Make a graph. 5. Create the cost function. 6. Assess the accuracy of the cost driver in the function.
Step 3, collecting the data, is usually the trickiest part for cost analysts.
Work Step by Step
To estimate a cost function based on past data, you go through six steps: 1. Choose the cost you want to predict (dependent variable). 2. Find the cost driver (independent variable). 3. Collect data on both. 4. Make a graph. 5. Create the cost function. 6. Assess the accuracy of the cost driver in the function.
Step 3, collecting the data, is usually the trickiest part for cost analysts.
