Exam 8: Cost Estimation and Budgeting

Direct costs are those clearly assigned to the aspect of the project that generated the cost.

A budget contingency of $1 million on a $10 million project means that the project will be planned for a cost of $10 million,but the project organization receives an extra $1 million to guard against unforeseen cost overruns.

What are parametric cost estimates and how are they developed?

Once most of the design work is complete,at a point when the scope and capabilities of the project are quite well understood,a ________ may be developed.

Estimates based on the assumption that historical data can be used as a frame of reference for current estimates are:

What is a budget contingency and what are three reasons it might be useful?

The 1974 model Eldorado is a three-ton behemoth with a 500-cubic-inch engine that is long on style but short on gas mileage.During its five-year development process no one could possibly have anticipated that gas prices would go through the roof in 1973,making it far more expensive to operate and subsequently less attractive to a gas-price-conscious public.Design engineers scrambled to change the car in the last few months leading up to its debut,adding a slimmed down version with a smaller engine.All of the design overtime meant that the project budget took a big hit though,thanks to:

It took 66 hours of analysis to complete the first phase,but the second phase was done in 61 hours.If this learning rate continues,then the 8?? analysis should take a mere:

How are top-down and bottom-up budgets created? What advantages does each approach hold over the other?

The gentleman farmer and surrealist aficionado commissioned a mural on barn that was an homage to Salvador Dalí's Persistence of Memory with a few farm animals included.The project would require the services of a senior muralist,a junior muralist,and a gofer.The senior muralist has an annual salary of $120,000,the junior muralist draws an annual salary of $75,000,and the gofer makes $30,000 per year.It is anticipated that the project will require 25 hours of senior muralist time,40 hours of junior muralist time,and 60 hours of gofer time.Overhead charges vary by position; the gofer has a lower overhead rate (30%)than the two muralist positions (50%).Use 2080 hours as an estimate for the number of hours in a year and a 15% factor for personal time.What is the total direct labor cost for the project?

Top-down budgeting,where input is gathered directly from the organization's top management,is often quite accurate.

A normal cost is incurred when:

It took 44 hours of analysis to complete the first phase,but the second phase was done in 42 hours.If this learning rate continues,then the 8th analysis should take a mere:

What are function points and how do they work?

Three workers complete a full 8-hour day finishing concrete for a terrace.All three workers are paid $12 an hour and the job bills to the customer for $450.What are the total direct labor costs?

What is the cumulative cost in February in this time-phased budget? Activity January February March April Survey 8,000 Design 5,250 4,500 Dirt 6,700 Foundation 12,550 Framing 37,250 Plumb 7,800 Wire 5,500

Explain the difference between normal and expedited costs,fixed and variable costs,and recurring or nonrecurring costs.Create a 2 × 2 × 2 matrix and provide one example each (8 total examples)of each combination of these costs.

It was fortunate that the project budget included contingency funding; the top manager had not foreseen that the project would need the services of their elite slide rule squad in more than one area at the same time.Design couldn't complete their work without their services,nor could marketing,or production.Contingency funds came in handy to meet the unanticipated:

What learning rate is being demonstrated if the first unit takes 25 hours and the third unit takes 24 hours to complete?

After years of tinkering and reverse engineering initiatives,Kimray had finally unlocked the secrets of the Beta tape format.A quick trip to the rental store was an epiphany for company leadership when they realized that only a handful of Beta tapes were available; the rest of the world had adopted the VHS format seemingly overnight.Now they would have to buy a few of those newfangled VHS machines to see how they ticked.The contingency funds that management had set aside would be put to good use on this: