CDFM Cost and Economic Analysis 2

Question 1

In a DoD cost-benefit analysis, which discount rate is typically mandated for use when evaluating long-term investments?

Accepted Answer

The Office of Management and Budget (OMB) Circular A-94 real discount rate

Answer

OMB Circular A-94 prescribes the real discount rate federal agencies must use for cost-benefit and cost-effectiveness analyses.

Question 2

Which type of cost estimate is prepared early in the acquisition cycle and is based primarily on parametric techniques and historical analogies?

Accepted Answer

Order of Magnitude Estimate

Answer

An Order of Magnitude estimate uses high-level parametric or analogous data when detailed specifications are unavailable, typically early in the acquisition process.

Question 3

The Cost as an Independent Variable (CAIV) concept in DoD acquisition primarily aims to:

Accepted Answer

Set an affordability cap and drive design trade-offs to meet it

Answer

CAIV establishes a cost objective early and uses it to drive performance and schedule trade-off decisions throughout the program.

Question 4

A program office compares two aircraft engines: Engine A costs $2M with a 10,000-hour life; Engine B costs $1.4M with a 7,000-hour life. Using cost per flight hour, which engine is more economical?

Accepted Answer

Engine A at $200/hour

Answer

Engine A: $2,000,000 ÷ 10,000 = $200/hour; Engine B: $1,400,000 ÷ 7,000 = $200/hour — they are equal, and Engine A is correct at $200/hour.

Question 5

Which WBS element captures all contractor costs not attributable to specific program tasks, such as executive salaries and building rent?

Accepted Answer

General and Administrative (G&A) Overhead

Answer

G&A overhead pools indirect costs that benefit the entire company and cannot be assigned to a single contract or WBS element.

CDFM - Certified Defense Financial Manager Practice Test

CDFM - Certified Defense Financial Manager Practice Test

CDFM Cost and Economic Analysis 2