Cost modeling is the analysis of resource data "” direct labor; direct material; indirect costs; selling, general and administrative costs; R&D costs; and profit "” to understand the projected or true cost of products and services produced or purchased by an organization.
There are many types of cost models, both external and internal. External cost models include industry-specific projected cost models for both products and services, and the total cost of ownership model. Internal cost models include break-even cost models, make-or-buy cost models, internal projected cost models, crossover chart models and cost-of-quality models.
