CCT Cost Estimation & Budgeting 2 — Questions and Answers
Question 1: Which estimating technique uses a mathematical relationship between a physical or functional characteristic and cost?
- Parametric estimating (Correct answer)
- Bottom-up estimating
- Analogous estimating
- Expert judgment
Correct answer: Parametric estimating
Parametric estimating uses statistical relationships between historical data and project parameters to calculate cost.
Question 2: 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?
- $550,000 (Correct answer)
- $500,000
- $562,500
- $450,000
Correct answer: $550,000
EAC = AC + (BAC - EV) = $250,000 + ($500,000 - $200,000) = $550,000 when future work proceeds at planned rate.
Question 3: What type of cost estimate is typically produced during the conceptual phase of a project with an accuracy range of -30% to +50%?
- Order of magnitude estimate (Correct answer)
- Definitive estimate
- Budgetary estimate
- Control estimate
Correct answer: Order of magnitude estimate
An order of magnitude estimate, used early in project development, typically has an accuracy range of -30% to +50%.
Question 4: Which contingency reserve approach allocates reserve based on a percentage applied to individual work packages?
- Activity-level contingency (Correct answer)
- Project-level contingency
- Management reserve
- Risk-adjusted baseline
Correct answer: Activity-level contingency
Activity-level contingency applies a percentage or fixed amount to each work package to cover identified uncertainties.
Question 5: When using the factor method for cost estimation, what is the basis for calculating equipment-related costs?
- Major equipment cost (Correct answer)
- Total installed cost
- Labor hours
- Material weight
Correct 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.
Question 6: A cost engineer is preparing a life cycle cost analysis. Which cost category includes end-of-life disposal and decommissioning expenses?
- Retirement and disposal costs (Correct answer)
- Operations and maintenance costs
- Capital investment costs
- Transition costs
Correct answer: Retirement and disposal costs
Retirement and disposal costs encompass decommissioning, demolition, environmental remediation, and asset disposal at end of useful life.
Question 7: What is the primary purpose of a cost baseline in project management?
- To measure and monitor cost performance over time (Correct answer)
- To establish the maximum allowable project budget
- To document all approved change orders
- To allocate management reserve
Correct 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.
CCT Cost Estimation & Budgeting 2
Which estimating technique uses a mathematical relationship between a physical or functional characteristic and cost?