Dictionary of Accounting Terms: cost prediction
cost prediction
forecast of costs for managerial decision-making purposes. The terms cost estimated costand cost predictionare used interchangeably. To predict future costs, a cost functionis often specified and estimated statistically. The cost function may be either linear (i.e., y= a+ bx) or nonlinear. The estimated cost function must pass some statistical tests, such as having a high r-squared (r-SQUARED)and a high T-value, to provide sound cost prediction.
