CDFM Cost and Economic Analysis 3

Question 1

Under DoD 5000.04-M, the primary purpose of an Independent Cost Estimate (ICE) is to:

Accepted Answer

Provide an unbiased cost assessment separate from the program office estimate

Answer

An ICE is produced by an independent organization (e.g., CAPE) to give decision-makers an unbiased perspective on program costs free from program office advocacy.

Question 2

A sensitivity analysis in a defense economic analysis is used primarily to:

Accepted Answer

Identify how changes in key assumptions affect the outcome

Answer

Sensitivity analysis systematically varies input assumptions to show which variables most influence the economic analysis results.

Question 3

The 'sunk cost fallacy' in defense resource allocation refers to:

Accepted Answer

Letting past irrecoverable expenditures influence future investment decisions

Answer

Sunk costs are already spent and cannot be recovered; rational analysis should base future decisions only on prospective costs and benefits.

Question 4

Which contract type places the greatest cost risk on the government?

Accepted Answer

Cost Plus Fixed Fee (CPFF)

Answer

Under CPFF, the government reimburses all allowable costs plus a fixed fee regardless of actual cost performance, placing maximum cost risk on the government.

Question 5

In a life-cycle cost analysis, Operations and Support (O&S) costs for a major defense system typically represent what proportion of total life-cycle costs?

Accepted Answer

50–80 percent

Answer

O&S costs (fuel, maintenance, personnel, training, sustaining support) typically account for 60–80% of total life-cycle costs for major defense systems.

CDFM - Certified Defense Financial Manager Practice Test

CDFM - Certified Defense Financial Manager Practice Test

CDFM Cost and Economic Analysis 3