Activity Analysis, Cost Behavior, and Cost Estimation

After completing this chapter, you should be able to:

1. Explain the relationships between cost estimation, cost behavior, and cost prediction.

2. Define and describe the behavior of the following types of costs: variable, step-variable, fixed, step-fixed, semivariable (or mixed), and curvilinear.

3. Explain the importance of the relevant range in using a cost behavior pattern for cost prediction.

4. Define and give examples of engineered costs, committed costs, and discretionary costs.

5. Describe and use the following cost-estimation methods: account classification, visual fit, high-low, and least-squares regression.

6. Describe the multiple regression, engineering, and learning-curve approaches to cost estimation.

7. Describe some problems often encountered in collecting data for cost estimation.

8. Perform and interpret a least-squares regression analysis with a single independent variable (appendix).