Simple regression analysis uses one independent variable and one dependent variable. Regression analysis can be either simple or multiple. The best way to do a regression analysis is in a computer program. Regression analysis requires having a set of data for both the dependent and independent variables. The analysis essentially computes how much of the variance in the dependent variable is due to variations in the independent variable. Regression analysis is a method of relating a dependent variable to an independent variable. This gives you the high-low cost equation for that particular cost-incurring activity. Finally, you compute the intercept using the slope and one of the points. Then use these four pieces of data to calculate the slope of the line that connects the two points. You take the highest cost and the highest cost-driver activity level and the lowest c ost and the lowest cost-driver activity level from the data set. Using the high-low method requires having a set of data relating costs to cost-driver activities. It is a rather simple technique and it is less accurate than more sophisticated cost estimation techniques, such as regression analysis. You can use the high-low method is a technique for cost estimation in forecasting. The zero-based budget method essentially requires starting from scratch each period. The tradition method of budgeting typically uses the previous period’s budget at a starting point for the upcoming period’s budget. Budgets can also be prepared using the traditional method or the zero-based method. Evaluating performance and providing goal-based incentives to management and other personnel inside the organizationīudgets are prepared using current and historic data and estimations about future trends.Managing financial and operational performance during the fiscal period.Allocating resources within an organization.Facilitating coordination and communication of these plans throughout the organization.Planning for the upcoming fiscal period.There are several common tools and techniques used for forecasting in the field of cost accounting, including the following:īudgeting is the process of preparing a budget in order to plan for revenues and expenses in an upcoming fiscal period.Ī budget has five primary objectives. Forecasting is important for planning purposes – it is necessary to estimate and plan for costs that will be incurred prior to actually incurring them. Jul 23 Back To Home Forecasting in Accountingīudgeting vs Forecasting Forecasting in Accountingįorecasting in accounting refers to the process of using current and historic cost data to predict future costs.
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