Question

At the Company”Z” the cost of the library and information center has always been charged to...

At the Company”Z” the cost of the library and information center has always been charged to the various departments based upon number of employees. Recently, opinions gathered from the department managers indicate that the number of engineers within a department might be a better predictor of library and information center costs.

                  Total library and information center costs are $200,000

                        Department                                                   1              2              3

                        Number of employees                                25            50            12

                        The number of engineers                              0            17              2

Which cost estimation method is being used by Company Z?

Account analysis method

B.

Quantitative analysis method

C.

Conference method

D.

Industrial engineering method
Business   Accounting   
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Homework Answers

Answer #1

Answer: Option C is correct ; Conference method

Explanation:

Conference method is defined as the method of pooling together the data, knowledge and analysis from the expert sources for decision making in costing. In other words, this method estimates cost functions on the basis of analysis and opinions about the costs and their drivers gathered from various departments of a company.

In the above scenario, opinions are gathered from the department managers which indicates that the number of engineers within a department might be a better predictor of library and information center costs. Hence, conference method is the most appropriate and ideal method of cost estimation being used by company Z.

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