Journal of Research in National Development

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The application of cost behaviour and estimation in organisational decision making process

JA Okunbor


The issue of cost behaviour and cost estimation is vital and fundamental in tactical decision-making, planning and control. In addition, the preparation of budgets, the production of performance reports, the calculation of  standard cost and the provision of relevant costs for pricing and other decisions depend on reliable estimates of costs and cost behaviour. This paper therefore examines the various cost behavioural patterns, methods of cost estimation, limitations, their implications for tactical decision  making process in an organization The paper shows that Engineering methods, inspection of the accounts, High-Low method, scattered graph  and the Least square regression methods are some of the approaches that are at the disposal of the management accountant in estimating future  costs of an organisation. Based on these findings, the paper recommends among others the need for the regular training of the management  accountant in the modern methods of cost estimation, the need for  accurate keeping of records of transactions and for long term forecasting of cost, management should rely on quantitative factors and judgment

Keywords: Cost, behavior, estimation.organisation


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