This analysis helps in isolating the effects of various factors to a great extent.įor example- there is a positive relationship between sales expenditure and sales profit. A number of variables affect a business phenomenon simultaneously in economic and business situation.
#Cocomo model efficieny in present and future condition series
In this method two or more inter-related series are used to disclose the relationship between the two variables. It assumes that the effect of these factors is of a constant and stable pattern and would also continue to be so in future. Under it, effects of various components of the time series are not separated, but are taken in their totality. This method slightly differs from trend analysis method. In this different formulas are used to fit the trend.Įxtrapolation method is based Time series, because it believes that the behaviour of the series in the past will continue in future also and on this basis future is predicted. This is considered valid for short term projection. It is based on the assumption that past trend will continue in future.
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This technique is used when data are available for a long period of time and the trend is clearly visible and stable. This analysis involves trend, seasonal variations, cyclical variations and irregular or random variations. This is also known as ‘Time Series Analysis’. It has been advised that different index numbers should be prepared for different activities. These barometers may be used only when general trend may reject the business of the forecasts. The forecasts should bear in mind that such barometers (index numbers) have their own limitations and precautions should be taken in their use. This lag period though difficult to predict precisely, gives some advance signals for likely change in future.
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Thus, with the help of business activity index numbers, it becomes easy to forecast the future course of action projecting the expected change in related activities within a lag of some period. It may reflect higher employment and income opportunity after some period. When used in conjunction with one another or combined with one or more index numbers, provide an indication of the direction in which the economy is heading.įor example-a rise in the amount of investment may bring an upswing in the economy. Just as Barometer is used to measure the atmospheric pressure similarly in business Index numbers are used to measure the state of economy between two or more periods. In this technique the data of past performance of a product or product line are used and analysed to establish a trend or rate of change which may show an increasing or decreasing tendency.įollowing are the important quantitative techniques used for the purpose of forecasting: They focus entirely on patterns and on historical data. Quantitative techniques are known as statistical techniques. In this method of forecasting, the management may bring together top executives of different functional areas of the enterprise such as production, finance, sales, purchasing, personnel, etc., supplies them with the necessary information relating to the product for which the forecast has to be made, gets their views and on this basis arrives at a figure. This method is also called as “top down” method of forecasting. On the other hand, in the case of indirect method of forecasting, first estimates are made for the entire trade or industry and then the share of the individual units of that industry is ascertained. This method is also called bottom up method of forecasting. In the case of direct method, the different subordinate units on departments prepare estimates and the company takes the aggregate of these departmental estimates. This method, when compared to others, is more dynamic in character. The main feature of this method is that it is not guided by the end and it relies on the present situation for probing into the future.
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In the deductive method, investigation is made into the causes of the present situation and the relative importance of the factors that will influence the future volume of this activity. On the basis of these estimates the total sales forecast for the entire concern may be developed by the business concern. The area sales manager who is in charge of many sub-areas may ask his salesmen to develop a forecast for each sub-area in which they are working. For Example-For developing sales forecasts, each area sales manager may be asked to develop a sales forecast for his area. Under this technique indirect data are used for developing forecasts.