' Information Systems Analysis & DesignQ. It requires to explain the three approaches to...

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Accounting

' Information Systems Analysis & Design
Q. It requires to explain the three approaches to costestimation and give examples of each.

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The approaches to cost estimation to be covered are listed below Account analysis Scatter graphs Highlow method Cost estimation approaches are necessary only for costs that are identified as mixed costs There is no need to apply an estimation method to break a cost into fixed and variable portions if it had already determined it is solely fixed or solely variable The Goal of Cost Estimation The ultimate goal of cost estimation is to determine the amount of fixed and variable costs to create a cost formula to be used to predict future costs The cost formula or cost equation is the output of the cost estimation process Because it have only one variable number of units the formula will be a straight line or linear equation The formula that represents the equation of a line will appear in the format of Y mx b where Y total cost m the slope of the line ie unit variable cost X the number of units of activity b the yintercept ie total fixed costs Y VCx TFC is the equivalent equation used in accounting for estimating costs The total cost side of the equation Y can also be expressed as fx so that the formula appears as fx VCx TFC As such the equation is often referred to as a function In accounting it is referred to as a cost function because the Y equates to total cost Account Analysis Method The account analysis method of estimating fixed and variable costs is likely the approach you have used to identify cost behavior so far in your study of managerial See Answer

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' Information Systems Analysis & DesignQ. It requires to explain the three approaches to...

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Accounting

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' Information Systems Analysis & DesignQ. It requires to explain the three approaches to...

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' Information Systems Analysis & Design
Q. It requires to explain the three approaches to costestimation and give examples of each.