Question

Describe the conference method for estimating a cost function. What are two advantages of this method?

1) The conference method use a formal mathematical method to fit cost functions to past observations. Advantages of the conference method include
1) The speed with which cost estimates and be developed.
2) Easy to use.
2) The conference method estimates cost functions by classifying various cost accounts as variable, fixed or mixed with respect to the identified level of activity. Advantages of the conference method include
1) Reasonably Accurate
2) Easy to use
3) The conference method estimates cost functions on the basis of analysis and opinions about cost and their drivers gathered from various departments of a company (purchasing, process engineering, manufacturing, employee relations, etc.)
1) The speed with which cost estimates can be developed.
2) The pooling of knowledge from experts across functional areas.
4) None of the above are correct.

Answer 1

The conference method for estimating a cost function involves experts who use their experience to estimate costs quickly, incorporating expert opinions for a comprehensive understanding.

Step-by-step explanation:

The conference method for estimating a cost function is a managerial accounting technique that involves a group of experts who use their experience and knowledge to estimate the relationship between costs and activity levels. One of the advantages of this method is the speed at which cost estimates can be developed, as it relies on the insights and rapid consensus of the experts rather than on extensive data analysis.

Another advantage of the conference method is the incorporation of expert opinions, which may lead to a more comprehensive understanding of the costs involved, taking into account factors that might not be immediately evident in numerical data, such as impending market changes or technological advancements.

Overall, this method is particularly useful when historical data is insufficient or when a new operation is being evaluated for which past data does not exist. Its main strengths lie in harnessing the collective expertise of knowledgeable individuals and the ability to quickly generate cost function estimates when time is of the essence.