Cost estimation is the process of developing a well-defined relationship between a cost object and its cost driver for the purpose of predicting the cost. The cost predictions are used in each of the management functions: Strategic Management: Cost estimation is used to predict costs of alternative activities, predict financial impacts of alternative strategic choices, and to predict the costs of alternative implementation strategies.
Planning and Decision Making: Cost estimation is used to predict costs so that management can determine the desirability of alternative options and to budget expenditures, profits, and cash flows.
Management and Operational Control: Cost estimation is used to develop cost standards, as a basis for evaluating performance. Product and Service Costing: Cost estimation is used to allocate costs to products and services or to charge users for jointly incurred costs.
Planning and Decision Making: Cost estimation is used to predict costs so that management can determine the desirability of alternative options and to budget expenditures, profits, and cash flows.
Management and Operational Control: Cost estimation is used to develop cost standards, as a basis for evaluating performance. Product and Service Costing: Cost estimation is used to allocate costs to products and services or to charge users for jointly incurred costs.
0 comments