Cost Estimation & Budgeting Flashcards
7 cards from real CCT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cost Estimation & Budgeting flashcards as text
What is the purpose of an independent cost estimate (ICE)?
Answer: To validate the reasonableness of contractor bids or internal estimates
An ICE is prepared by a party not involved in the original estimate to provide an objective check on cost reasonableness.
Which method of cost allocation distributes overhead to cost centers based on machine hours or direct labor hours?
Answer: Traditional absorption costing
Traditional absorption costing allocates overhead using a single volume-based driver such as machine hours or direct labor hours.
A project's cumulative planned value (PV) curve plotted over time is commonly called what?
Answer: S-curve
The S-curve represents cumulative planned value over time and gets its name from the characteristic S-shape of most project spending profiles.
What is the definition of 'allowance' in cost estimating?
Answer: A cost added to an estimate for known but undefined scope elements
An allowance is a provision in the estimate for known scope elements that cannot yet be fully defined or quantified.
In the context of cost estimating, what does 'scope creep' primarily cause?
Answer: Cost overruns due to uncontrolled additions to project scope
Scope creep refers to the gradual, unauthorized expansion of project scope that drives cost overruns when not formally controlled.
Which estimating classification system is used by AACE International to categorize estimates by maturity of project definition?
Answer: Class 1 through Class 5
AACE International's Recommended Practice 18R-97 defines five estimate classes (Class 1-5) based on the degree of project definition.
What is the primary advantage of using activity-based costing (ABC) over traditional cost allocation methods?
Answer: It provides more accurate cost data by tracing overhead to activities that consume resources
ABC identifies the activities that drive costs and assigns overhead based on each product's actual consumption of those activities, yielding more accurate cost data.