ACAP Cost Risk and Uncertainty Analysis 2

Question 1

What is the coefficient of variation (CV) used for in cost risk analysis?

Accepted Answer

To measure relative variability of a cost estimate as standard deviation divided by the mean

Answer

The CV normalizes variability by the mean, allowing analysts to compare uncertainty levels across cost elements of different magnitudes.

Question 2

In cost risk terminology, what is 'aleatory uncertainty'?

Accepted Answer

Irreducible variability inherent to a process or system

Answer

Aleatory uncertainty arises from natural randomness (e.g., actual manufacturing variation) and cannot be eliminated through better analysis, unlike epistemic uncertainty.

Question 3

Which distribution is most commonly used to represent a cost element's uncertainty when only minimum, most likely, and maximum values are known?

Accepted Answer

Triangular distribution

Answer

The triangular distribution requires only three expert-supplied parameters (min, mode, max) and is widely used when historical data are limited.

Question 4

What does a 'tornado chart' display in cost risk analysis?

Accepted Answer

Ranked sensitivity of total cost to each individual input variable

Answer

A tornado chart ranks input variables from most to least impactful on the output, with the widest bars at the top, showing where analysts should focus risk reduction efforts.

Question 5

What is 'risk-adjusted cost estimate' in Army cost analysis?

Accepted Answer

An estimate that incorporates probability distributions for uncertain inputs rather than single point values

Answer

A risk-adjusted estimate replaces point values with probability distributions and propagates uncertainty to produce a range of likely costs rather than a single number.

ACAP - Army Cost Analysis Position Practice Test

ACAP - Army Cost Analysis Position Practice Test

ACAP Cost Risk and Uncertainty Analysis 2