Steps of developing a cost estimating relationship , Managerial Accounting


Firmly speaking, a CER is not a quantitative method. It is a framework for using suitable quantitative methods to quantify a relationship among an independent variable and cost or price. Development of a CER is a 6-step procedure as shown below:

Step1: State (or select) the dependent variable (Y)

Step2: Select the cost driver(s)

Step3: Gather data concerning the relationship among the dependent and independent variables

Step4: Plot the data on a graph

Step5: Choose the relationship which best predicts the dependent variable

Step6: Test the consistency of the cost function

Posted Date: 12/4/2012 7:25:11 AM | Location : United States

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