Estimating and

Controlling Cost
Techniques of Cost Estimation
• Engineering estimates of materials and work
required
• An examination of past cost behavior
Cost Segregation
•  High-low point method

• Where:
High- low point method
• Compute for the fixed and variable cost and identify
the total cost assuming the machine will be used
for 36,000 hours
Least-square method
• 
• Where:
Least-square method
•  Two equations needed:

• Where:
Coefficient of correlation
• 

Value of correlation Relationship

coefficient
0.0 to 0.3 or 0.0 to-0.3 Weak relationship
0.3 to 0.7 or -0.3 to -0.7 Moderate relationship
0.7 to 1.0 or -0.7 to -1.0 Strong relationship

• Coefficient of determination=
Least-square method
Hours Maintenance
• Compute for the coefficient of cost
correlation and 20 200
50 500
determination, fixed cost,
30 450
variable cost and identify the
20 250
total maintenance cost if the 10 150
hours of operations was 45 60 650
hours 30 250
40 500
60 550
50 600
40 200
10 200
Cost segregation
• The cost accountant of Tamis Days Grams Total
produced cost
Company recorded these cost of incurred
producing honey: Mon 100 1,000
• Using high-low method, how much Tue 75 600
will be the variable and fixed cost Wed 25 400
of producing honey? Thu 150 1,500
• Using least squares method, how Fri 175 1,600
much will be the variable and fixed Sat 50 600
cost of producing honey? Sun 125 1,300
• How much is the total cost in
either method if 118g will be
produced?