CDFM Cost and Economic Analysis 4

Question 1

In DoD economic analysis, 'constant-year dollars' are used primarily to:

Accepted Answer

Remove the effects of inflation so costs can be compared across years

Answer

Constant-year dollars adjust all costs to a single base year's purchasing power, eliminating inflation effects and enabling valid year-to-year cost comparisons.

Question 2

A contractor's overhead rate is 120% applied to direct labor. If direct labor is $500,000, what is the total overhead charge?

Accepted Answer

$600,000

Answer

$500,000 × 1.20 = $600,000 in overhead, which when added to direct labor gives a total burdened cost of $1,100,000.

Question 3

Which document establishes the analytical framework and ground rules for conducting a DoD economic analysis supporting a major investment decision?

Accepted Answer

Analysis of Alternatives (AoA) Study Plan

Answer

The AoA Study Plan defines the scope, methodology, ground rules, and assumptions that govern the economic comparison of system alternatives.

Question 4

Learning curve theory predicts that as cumulative production doubles, unit costs decrease by a fixed percentage. A 90% learning curve on a $1,000 first-unit cost means the second unit costs:

Accepted Answer

$900

Answer

A 90% learning curve means cumulative average cost is 90% of the prior level each time output doubles; the second unit's average is $900.

Question 5

The primary difference between a cost-effectiveness analysis and a cost-benefit analysis in a defense context is:

Accepted Answer

Cost-benefit monetizes all benefits; cost-effectiveness measures outcomes in non-monetary units

Answer

Cost-effectiveness compares alternatives by cost per unit of outcome (e.g., cost per target killed) without monetizing benefits, while cost-benefit converts all outcomes to dollars.

CDFM - Certified Defense Financial Manager Practice Test

CDFM - Certified Defense Financial Manager Practice Test

CDFM Cost and Economic Analysis 4