ACAP Cost Estimating Methodologies

Question 1

What are the four primary cost estimating methodologies recognized in DoD cost analysis?

Accepted Answer

Analogy, parametric, engineering build-up, and expert opinion

Answer

DoD cost estimating guidance identifies these four core methods, each suited to different data availability conditions and program maturity levels.

Question 2

What is the 'learning curve' concept and how is it applied in Army cost estimating?

Accepted Answer

As cumulative production quantity doubles, unit cost decreases by a fixed percentage, reflecting worker efficiency gains and process improvements

Answer

The learning curve (or progress curve) models the well-documented phenomenon that unit production labor hours decline predictably with cumulative production, reducing per-unit costs at higher quantities.

Question 3

What is an 'engineering build-up' estimate and when is it most appropriate?

Accepted Answer

A bottoms-up estimate built from detailed labor, material, and overhead costs for each component; most appropriate when design is mature and detailed technical data are available

Answer

Engineering build-up is the most detailed method and requires a mature design, but produces high-fidelity estimates by aggregating costs at the lowest WBS levels.

Question 4

What is a 'Cost Estimating Relationship (CER)' and what data is required to develop one?

Accepted Answer

A mathematical equation relating cost to one or more technical or program parameters, developed using regression analysis of historical cost and technical data

Answer

CERs are derived through statistical regression of historical data, with cost as the dependent variable and technical characteristics (weight, power, speed) as independent variables.

Question 5

What is the 'coefficient of determination (R²)' and what does it indicate about a CER?

Accepted Answer

It measures the proportion of variance in cost explained by the independent variable(s); a higher R² indicates a better statistical fit

Answer

R² ranges from 0 to 1; an R² of 0.90 means 90% of the variability in cost is explained by the CER, with a higher value indicating a more reliable relationship.

ACAP - Army Cost Analysis Position Practice Test

ACAP - Army Cost Analysis Position Practice Test

ACAP Cost Estimating Methodologies