The Stock Exchange in Japan requires Japanese firms listed on the exchange to report forecasts of sales and earnings in their annual press releases. Information regarding the forecasted costs is available by subtracting forecasted earnings from forecasted sales. On the basis of the recent cost behavior research method, the forecasted rate of change in costs can be compared with the actual rate of change in costs. The major findings of this paper are that managers underestimate an increase rate of change in costs when sales are expected to increase and they overestimate a decrease rate of change in costs when sales are expected to decrease. These findings suggest that costs tend to be underestimated, resulting in the optimism in management forecasts.