Cost Estimation & Budgeting Flashcards

Which estimating technique uses a mathematical relationship between a physical or functional characteristic and cost?

Answer: Parametric estimating

Parametric estimating uses statistical relationships between historical data and project parameters to calculate cost.

A project has a BAC of $500,000, EV of $200,000, and AC of $250,000. What is the Estimate at Completion (EAC) assuming future work is performed at the budgeted rate?

Answer: $550,000

EAC = AC + (BAC - EV) = $250,000 + ($500,000 - $200,000) = $550,000 when future work proceeds at planned rate.

What type of cost estimate is typically produced during the conceptual phase of a project with an accuracy range of -30% to +50%?

Answer: Order of magnitude estimate

An order of magnitude estimate, used early in project development, typically has an accuracy range of -30% to +50%.

Which contingency reserve approach allocates reserve based on a percentage applied to individual work packages?

Answer: Activity-level contingency

Activity-level contingency applies a percentage or fixed amount to each work package to cover identified uncertainties.

When using the factor method for cost estimation, what is the basis for calculating equipment-related costs?

Answer: Major equipment cost

The factor method uses major equipment cost as the base and applies factors to estimate other cost components like installation, piping, and instrumentation.

A cost engineer is preparing a life cycle cost analysis. Which cost category includes end-of-life disposal and decommissioning expenses?

Answer: Retirement and disposal costs

Retirement and disposal costs encompass decommissioning, demolition, environmental remediation, and asset disposal at end of useful life.

What is the primary purpose of a cost baseline in project management?

Answer: To measure and monitor cost performance over time

The cost baseline is the time-phased budget used as a reference point to measure, monitor, and control project cost performance.