CEP Cost Estimation Techniques & Methods 5

Question 1

Which type of estimate contingency is specifically set aside to cover known unknowns — identified risks that may or may not occur?

Accepted Answer

Contingency allowance

Answer

Contingency allowance covers identified risks and uncertainties within the defined project scope, as opposed to management reserve which covers unknown unknowns.

Question 2

What is the primary objective of Monte Carlo simulation in cost estimating?

Accepted Answer

To model the probability distribution of total project cost by randomly sampling input variable ranges

Answer

Monte Carlo simulation runs thousands of iterations, sampling input cost ranges to generate a probability distribution of the total estimated cost.

Question 3

In conceptual estimating for industrial facilities, what is the 'turnover ratio' method based on?

Accepted Answer

Ratio of annual sales revenue to total capital investment for similar plants

Answer

The turnover ratio method estimates capital cost as a fraction of projected annual revenue, using industry-specific ratios from comparable facilities.

Question 4

Which of the following is a characteristic of a 'grass-roots' estimate versus a 'battery-limits' estimate?

Accepted Answer

Grass-roots includes all offsite facilities, utilities, and infrastructure; battery-limits covers only the process unit

Answer

A grass-roots estimate encompasses the complete facility including all offsites; a battery-limits estimate covers only the defined process equipment and its immediate connections.

Question 5

What distinguishes 'quantity takeoff' (QTO) from other estimating methods?

Accepted Answer

QTO physically measures and counts materials and labor from engineering drawings to determine quantities

Answer

Quantity takeoff involves systematically measuring lengths, areas, volumes, and counts directly from design documents to establish precise material and labor quantities.

(CEP) Certified Estimating Professional Practice Test

(CEP) Certified Estimating Professional Practice Test

CEP Cost Estimation Techniques & Methods 5