Chapter 2 Costing Techniques

Question 1

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

Answer 1

Analogy technique

Question 2

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

Answer 2

Parametric technique

Question 3

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

Answer 3

Build-up

Question 4

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

Answer 4

Precision

Question 5

Other techniques include ________ and ___________.

Answer 5

expert opinion, extrapolation from actuals.

Question 6

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

Answer 6

accuracy

Question 7

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

Answer 7

accuracy, Precision

Question 8

__________ 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

Answer 8

Uncertainty

Question 9

________ 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.

Answer 9

Risk

Question 10

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.

Answer 10

Analogies

Question 11

What are the advantages and disadvantages of using an Analogy

Answer 11

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

Question 12

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

Answer 12

canned CER (Cost Estimating Relationship)

Question 13

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

Answer 13

too dated

Question 14

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

Answer 14

build-up

Question 15

____________ 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.

Answer 15

Standards development

Question 16

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.

Answer 16

variance factors

Question 17

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

Answer 17

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

Question 18

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

Answer 18

Top-down and bottom up

Question 19

_________ 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.

Answer 19

Top-down

Question 20

_________ 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.

Answer 20

Bottom-up

Question 21

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.

Answer 21

Cost Element Structure (CES)

Question 22

What are the advantages and disadvantages of using a parametric estimate

Answer 22

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)

Question 23

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

Answer 23

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