The better the accuracy of a cost estimate, the better the planning and decision-making is in predicting and adjusting for future change. This is critical when business decisions need to be made on educated guesses where a bad decision can end up in a serious loss of profit.
Past experience is a good starting point for developing time and cost estimates. But past experiences must almost always be refined to reach an acceptable level of accuracy. Past experience. Work packages. Task analysis. Time and motion studies. Work breakdown structure.
C. The more detailed the estimate is the more the estimate will cost to create The salary of the project manager would be an example of what type of cost found in a project? A. Direct costs.
Cost-estimate accuracy forces a business project to stay on schedule and on track. Particularly with client projects, once an estimate is confirmed, the business has to stay within budget if it doesn’t want to lose money.
An estimating procedure used when there is significant uncertainty regarding the cost or time to complete a specific activity. Individuals estimate the worst case, best case , and most likely cost or time for a specific activity to determine the range of costs and times (i.e. activity A should take 4 days but it could take between 2 and 7 days to complete).
Refining estimates may be necessary for a number of reasons. For example, a manager getting further into a project and obtaining a better understanding of what needs to be done to accomplish a project and meet the needs of the customer is an example of:
This macro method of forecasting cost does not provide a sound basis for project cost control since it does not recognize differences among projects.
Adding a safety factor to a time or cost estimate to ensure the estimate is met when the project is executed.
Points derived from past software projects to estimate project time and cost, given specific features of the project .
Overhead costs. Typically organization costs that are not directly linked to a specific project. These costs cover general expenses such as upper management, legal, market promotion, and accounting. Overhead costs are usually charged per unit of time or as a percentage of labor or material costs.
Costs allocated to a specific segment of a project by using a percentage of planned total cost—for example, framing a house might use 25 percent of the total cost, or coding a teaching module 40 percent of total cost.
C. The more detailed the estimate is the more the estimate will cost to create
A. They are made by someone who uses experience and/or information from someone else to determine overall project cost and duration
Sean is forecasting the time and cost of developing a customized software program by looking at the number of inputs, outputs, inquiries, files, and interfaces. Which of the following methods is he using?
The importance of accurate cost estimates becomes significant when decisions that can result in changes occur. Investment of funds in new directions as well as cost-cutting for savings both depend heavily on cost estimates being correct.
Accuracy is Critical. The better the accuracy of a cost estimate, the better the planning and decision-making is in predicting and adjusting for future change . This is critical when business decisions need to be made on educated guesses where a bad decision can end up in a serious loss of profit.
Bad estimates cost a business in two ways. Obviously, underestimating expenses of a project can create a financial emergency half-way through or at an important juncture, which can put the project completion at risk. Insufficient resources or support of labor can effectively shut a project down, making it more expensive to finish due to delay. All of this unexpected cost increase then reduces or eliminates profit. Overestimating creates fat in the project with too many resources. Valuable funds get wasted on over-consumption, again reducing dollars that could have been attributed to profit.
All of this unexpected cost increase then reduces or eliminates profit. Overestimating creates fat in the project with too many resources.
Particularly with client projects, once an estimate is confirmed, the business has to stay within budget if it doesn’t want to lose money. This has a ripple effect on all the business’ activities to come in at or below budget while meeting all of the client’s goals, including schedule and delivery.
What Is Capital Budgeting and Why Is It Important? Estimating costs correctly is important because it help make the right commitment of dollars to a business activity. The process takes a bit of experience, research, decision-making and judgment. However, none of these elements alone will produce a good cost estimate.