Assignment No. 1

You Decide Choosing a Cost Estimation Method

Assume that you work as a managerial accountant for Mesfin Industrial Engineering. The company operates some of the world's biggest trucks, which weighs 600 tons and carries 50 tons. As a managerial accountant, one of your most important tasks is to estimate the costs that Mesfin Industrial will incur on the many trucks it offers to customers each year. The accuracy with which you predict Mesfin's most important truck-related costs will affect many of the strategic and operating decisions made by management. You are familiar with several common cost estimation methods, including scatter graph, high-low, and regression. However, you also are aware that each method has its advantages and disadvantages.

Which cost estimation method should you employ?