Chapter 2 Costing Techniques Flashcards

1
Q

The ___________ refers to comparing the cost of an item to be estimated to that of a similar item.

A

Analogy technique

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2
Q

The _____________ uses a mathematical relationship based on historical data to relate cost to one or more technical, performance, cost, or programmatic parameters.

A

Parametric technique

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3
Q

The _______ technique involves estimating costs at the lowest definable level and typically applies to Industrial Engineering (IE).

A

Build-up

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4
Q

__________ is the spread of the range of outcomes that the estimate produces.

A

Precision

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5
Q

Other techniques include ________ and ___________.

A

expert opinion, extrapolation from actuals.

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6
Q

_______ conveys whether the range is centered on the true value.

A

accuracy

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7
Q

Precision and accuracy in cost estimates are ideal, but _______ is more important. _______ can give a false sense of security.

A

accuracy, Precision

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8
Q

__________ captures the range of possible outcomes of the estimate which characterizes its precision. This is best done as a probability distribution, usually an empirical one resulting from a Monte Carlo simulation which can then be summarized with a confidence interval

A

Uncertainty

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9
Q

________ refers to the upward shift applied to the cost estimate range to account for the fact that unadjusted estimates tend to be systematically low. This adjustment is intended to eliminate what appears to be an inherent bias in estimates and improves the estimate’s accuracy.

A

Risk

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10
Q

Cost estimators typically use _________ early in the program life cycle when there is little definition in the new program or a lack of a pre-existing cost model. Most development programs have some heritage in design.

A

Analogies

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11
Q

What are the advantages and disadvantages of using an Analogy

A

Advantages:
it can be used before detailed program requirements are known.
An easy Technique to use if a sufficient database exists on a analogous system
Disadvantages:
Tendency to be too subjective in making an analogy

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12
Q

A _______ is one that someone else developed and the raw data is not accessible.

A

canned CER (Cost Estimating Relationship)

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13
Q

If a CER is ________, it will not provide an adequate cost estimate for the current state. In fact, as technologies change, a dated CER can be exactly wrong. For example, weight often moves from a direct (more weight = more material = more cost) to an indirect (less weight = more advanced material = more cost) relationship

A

too dated

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14
Q

The ______ method builds estimates for higher-level cost elements by summing or rolling up detailed estimates for lower-level cost elements.

A

build-up

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15
Q

____________ is the foundation for the build-up technique. They capture how long it takes to perform a particular task, based on time and motion studies done in controlled environments.

A

Standards development

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16
Q

Because no one operates at an optimum level, _________ (also known as realization factors) are calculated based on measures of a company’s actual experience compared to the standard.

A

variance factors

17
Q

Types of Expert Opinion are: __________,____________, and ____________

A

One-on-one interviews with experts, Round-table discussion, Delphi technique

18
Q

There are two main ways to structure a cost estimate, ________ an- _________.

A

Top-down and bottom up

19
Q

_________ is generally associated with parametric or analogy. It involves known top-level requirements (e.g., weight or power) or parameters to develop an estimate for an entire system.

A

Top-down

20
Q

_________ involves working from information at the lowest level to develop an estimate for an entire system. Develop discrete estimates for each element by estimating required labor hours, materials, and other costs and applying direct and indirect rates, and then roll up these lower-level elements to arrive at an estimate for the entire system.

A

Bottom-up

21
Q

A good way to break down the estimate into manageable pieces is to develop a ____________ which is the framework for an estimate in a hierarchical tree structure where the costs of children sum up to the cost of their parent or, conversely, the cost of the parent can be allocated to the children.

A

Cost Element Structure (CES)

22
Q

What are the advantages and disadvantages of using a parametric estimate

A

Advantages:
-versatility. Parametric estimates can be developed at any level when
there is enough data
-analysts can perform sensitivity analysis by varying the input parameters and recording how cost changes with respect to that parameter.

Disadvantages:
-the underlying database upon which the CER is based must be
consistent and sufficiently robust
- Canned CERs (must have good data normalization)

23
Q

What are the advantages and disadvantages of using a Build-Up estimate

A

Advantages:
- show exactly what the estimate covers and helps determine if
anything was overlooked.
- The variance factors applied to standards are based on verifiable
actual cost data.

Disadvantages:
- it can be expensive to implement if companies develop their own standards
- requires extensive data collection and monitoring for variance factors
- small errors at the touch labor level can be magnified into much larger errors
- Omissions are likely