1. Demonstrate the importance of sales forecasting. Sales forecasting is the foundation of budgeting. Companies forecast customer demand and use this data to estimate sales revenue. Established companies often use historical trends to predict future sales. Start-up enterprises rely on surveys, industry data, and regional economic and demographic data to forecast revenues and costs.
   
   
2. Describe the role of cost drivers in estimating costs. Cost estimation requires that companies identify the factors that determine costs. These activities commonly are known as cost drivers. Cost drivers vary across industries and business processes. Managers must understand the relationships between business activities and related costs to determine the amount of fixed and variable costs that a company will incur.
   
   
3. Demonstrate the use of graphical and statistical forecasting techniques. Companies use graphical and statistical techniques to forecast revenues and costs. A common graphing technique is the scatter-plot method. The scatter plot is a graph with dollar revenue or cost volume plotted along the y-axis and business activity plotted along the x-axis. Scatter plots provide managers with a picture of the relationship between two variables. Today's technology allows managers to use statistical techniques, such as correlation and regression analysis, to formulate quantitative revenue and cost predictions.
   
   
4. Demonstrate the use of cost estimates in cost-volume-profit (CVP) analysis. Statistical techniques yield estimates for fixed and variable costs. These results can be incorporated in a firm's total cost equation, which in turn can be used in cost-volume-profit and breakeven analyses.
   
   
5. Discuss qualitative factors that affect costs. When making business decisions, managers must consider qualitative factors in addition to quantitative results. They must recognize environmental, industry. and other strategic factors that may impact cost estimation as well as the interpretation of quantitative data. The nature of costs varies across businesses, and past performance may not be indicative of future results. Further, companies must recognize how technological innovation and the learning curve increase efficiency and lower costs over time.