Definition: The conference method is an approach to cost estimation that pools together data, analyses, and knowledge from expert sources in order to make decisions about costs. In other words, this method looks at several different parts of an organization to get different perspectives about how to estimate costs.
What Does Conference Method Mean?
The conference method of cost estimation can be used by businesses to ensure that input from different functional and operational departments across the business are considered when making decisions about costs. An accounting professional may ask experts and specialists from areas such as human resources, engineering, or operations for input regarding cost functions.
One benefit for businesses that take this approach is that it prevents cost accountants from making decisions in a silo. When cost estimations include opinions and contributions from across functional areas, it makes all personnel trust in the accuracy of decisions about costs. Another benefit of this cost estimation method is that it can be performed quickly.
Let’s look at an example.
Chris is a cost accountant at the corporate headquarters of a large manufacturing firm. He is performing a cost function estimation, but does not have a lot of time to do so. While Chris is an expert when it comes to accounting principles, he does not have very much knowledge regarding the operational areas of the firm.
In order to gather information for his estimation, Chris calls a meeting with the department heads from all four of the manufacturing divisions at his company. Chris asks for their expert input about estimates and uses this new information to perform his cost estimation.
While Chris was able quickly complete his task, the conference method can be inaccurate at times. This method relies on opinions, meaning the quality of the data depends on the knowledge of the employees who gave it.