This document is intended for state level administrators responsible for planning, developing, and implementing policies and services related to the Infant-Toddler Program (Part H) and the Preschool Program (Part B) of the Education of the Handicapped Act Amendments of 1986. The document is designed to provide a framework for planning and conducting a cost analysis composed of several sequential steps. It also offers ideas about projecting costs, examples of methods used in various states, and results from individual states for use as reference points. The guide is organized around the nine cost analysis steps. These are: (1) state the purpose for conducting the cost analysis; (2) define the population to be served; (3) determine the number of eligible children; (4) determine how many children will be served; (5) determine how many children are currently being served and how many are unserved; (6) describe services and settings; (7) select and implement a cost methodology; (8) identify existing resources and potential gaps; and (9) report the findings and make recommendations. (DB)