2376 - Cost Estimating

Question 1

What is judgment or opinion regarding the cost of an object, commodity, or service?

Answer 1

Cost Estimation.

Question 2

What are indirect costs that benefit multiple programs or contracts, and therefore cannot feasibly be charged directly to just one?

Answer 2

overhead costs, also called burden

Question 3

What percentage of the life cycle costs do the following categories use on average: R&D____%, Investment Cost____%, O&S/Disposal____%

Answer 3

• R&D 10%
• Investment 15-30%
• O&S/Disposal 50-70%

Question 4

What are the two primary purposes of the Life Cycle Cost Estimate (LCCE).

Answer 4

• Serve as the cost input for decisions on whether to start, continue, modify, or terminate the development, production, and fielding of a system
• Provide the basis for budget requests to Congress

Question 5

What are the three types of acquisition program cost estimates.

Answer 5

• Program Office Estimate (POE)
• Component Cost Estimate (CCE)
• Independent Cost Estimate (ICE)

Question 6

What is the purpose of the Cost Analysis Requirements Description (CARD)?

Answer 6

• Is used to prepare for all MDAP or MAIS program milestone or decision review, per the DODI 5000.02.
• Is used to develop the Program Office Estimate (POE), Component Cost Estimate (CCE), and Independent Cost Estimate (ICE).
• describes the specifications of the program and assumptions the program office used in preparing the POE.
• is provided to other groups that perform cost estimates on the program.
• helps ensure all groups are costing out the same “program.”

Question 7

What is the role of OSD Cost Assessment and Program Evaluation (CAPE).

Answer 7

The CAPE prepares a separate and distinct cost estimate on MDAP / MAIS programs known as the Independent Cost Estimate (ICE),

Question 8

List and define the four basic methods used to develop cost estimates and how they relate to the life cycle model.

Answer 8

• Analogy – (Simplest) Comparison of similar systems or components. Used in early cost estimation when design is still in flux
• Parametric – Statistical analysis to develop cost/performance relationships. Used in early cost estimation
• Engineering – Detailed “Bottom-up” analysis of all materials, parts, and labor. Used when the design is or is becoming solidified and each piece and part can be priced
• Actual costs – Extrapolation based on identical, or nearly identical, existing systems (Most accurate). Used after the item has been made and the cost is known.

Question 9

List the two software cost estimate methods.

Answer 9

• Top-down

* Delphi (Expert Judgment Method)

Question 10

What is the theory that as the quantity of a product produced doubles, the recurring cost per unit decreases at a fixed rate or constant percentage

Answer 10

Learning Curve Theory.

Question 11

What is an acquisition process intended to integrate proven successful business related practices with promising new DoD initiatives to obtain superior, yet reasonably priced, warfighting capabilities?

Answer 11

Cost as an Independent Variable (CAIV)

Question 12

The method simplest cost estimating method is _______ and the most accurate is _______

Answer 12

Analogy, Actual