Untitled Quiz

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which type of cost is easily measurable and directly related to a specific project activity?

Investment costs

Intangible costs

Direct costs (correct)

Indirect costs

What kind of benefits are hard to quantify in monetary terms?

Tangible benefits

Investment benefits

Direct benefits

Intangible benefits (correct)

Which of the following is an example of indirect costs?

Taxes and insurance (correct)

Equipment procurement

Materials for the project

Salaries for project staff

Which cost is specifically characterized as the capital required to start a project?

Investment cost Signup and view all the answers

Which cost remains unchanged despite variations in the project's activity level?

Fixed cost Signup and view all the answers

What type of costs includes charges that are not billed to the project but are necessary for research?

Intangible costs Signup and view all the answers

Which statement accurately describes project costs?

They can consist of both direct and indirect costs. Signup and view all the answers

What differentiates fixed costs from variable costs?

Fixed costs do not fluctuate with activity levels. Signup and view all the answers

What are variable costs associated with?

Costs that vary with the quantity of output Signup and view all the answers

Incremental costs are incurred when?

Increasing the output of a system by one or more units Signup and view all the answers

Which of the following best describes sunk costs?

Costs that are unrecoverable and occurred in the past Signup and view all the answers

Opportunity costs are best defined as?

The costs of the next best alternative forgone Signup and view all the answers

Which of the following scenarios exemplifies sunk costs?

A non-refundable deposit made for a reservation Signup and view all the answers

What is a primary consideration when estimating project costs?

Classifying individual project components Signup and view all the answers

How should opportunity costs be viewed in project planning?

As potential income lost from alternative uses of resources Signup and view all the answers

Which type of cost results from changing product lines or increasing output?

Incremental costs Signup and view all the answers

What is the primary purpose of engaging a financial analyst in project cost estimation?

To offer detailed financial analysis Signup and view all the answers

Which project estimation approach is best used early in the estimating process?

Top-down approach Signup and view all the answers

What does the bottom-up approach primarily focus on?

Breaking down the project into smaller units for detailed cost estimation Signup and view all the answers

What is one of the components of an integrated approach to project estimation?

Work breakdown structure (WBS) Signup and view all the answers

In project cost estimation, which of the following is NOT a factor considered when using a top-down approach?

Staffing requirements Signup and view all the answers

How does the top-down approach utilize historical data for project estimation?

By modifying data from similar projects for current conditions Signup and view all the answers

When does the bottom-up approach work best in project estimation?

When project details are well-defined and clarified Signup and view all the answers

Which factor would likely NOT influence the cost estimation in a top-down approach?

Total number of staff involved Signup and view all the answers

What is the purpose of a work breakdown structure (WBS)?

To define tasks and deliverables needed for a project Signup and view all the answers

What does the 100% Rule indicate in project management?

All project scope must be accounted for Signup and view all the answers

In a Phase-Based WBS, how is work organized?

By dividing tasks by individual project phases Signup and view all the answers

Which technique is used to break down Level 2 deliverables in a WBS?

Decomposition Signup and view all the answers

During project estimation, what is typically employed to predict future costs?

Mathematical models Signup and view all the answers

What is a deliverable-based WBS primarily focused on?

Outcomes and deliverables needed for the project Signup and view all the answers

What should be ensured when breaking down work in a WBS?

All elements are managed by a single individual or organization Signup and view all the answers

Why is there a need for estimating techniques in project cost analysis?

To forecast costs and revenues accurately Signup and view all the answers

What is the purpose of creating a WBS Dictionary?

To provide a detailed description of work covered in each WBS element. Signup and view all the answers

At what level of the WBS are Work Packages found?

At the lowest level of the WBS. Signup and view all the answers

What is the main benefit of a Gantt chart in project management?

It provides a visual representation of tasks scheduled over time. Signup and view all the answers

Which of the following is NOT included in the WBS Dictionary descriptions?

Profit margins Signup and view all the answers

What do direct costs refer to in the Cost Structure?

Costs of employees’ time spent on project-related activities. Signup and view all the answers

How is the Cost Structure beneficial in project planning?

It provides a checklist to prevent overlooking important cost categories. Signup and view all the answers

What role does technical familiarity play in the Cost Structure?

It is essential for ensuring the completeness of the structure. Signup and view all the answers

Which of the following is a type of cost that arises from purchasing materials for a project?

Material costs Signup and view all the answers

What is the typical accuracy range for order-of-magnitude estimates?

±30 to 50% Signup and view all the answers

In which stage of a project are definitive estimates primarily used?

Detailed engineering/construction stage Signup and view all the answers

What is the accuracy of semi-detailed or budget estimates?

±15% Signup and view all the answers

Which method is commonly used to develop order-of-magnitude estimates?

Semiformal methods such as conferences and questionnaires Signup and view all the answers

At what level of the Work Breakdown Structure (WBS) are definitive estimates typically conducted?

Level 3 and successive levels Signup and view all the answers

What was the average cost of residential building estimated per square meter for the first quarter of 2017?

PHP 9,605 Signup and view all the answers

What do definitive estimates provide for the project?

Basis for bids and detailed design decisions Signup and view all the answers

Which type of estimate is used to support preliminary design efforts?

Semi-detailed or budget estimates Signup and view all the answers

Study Notes

Estimation of Detailed Costs and Benefits of Engineering Projects

Estimating detailed costs and benefits is essential for any engineering project.
This presentation is about estimating the costs and benefits of engineering projects.
The presenters are Engr. John Paulo M. Perido, MSc and Engr. Kelvin Michael A. Crystal, MSc.
The course is ENSC31.

Project

A project is a collaborative venture, often involving research or design, carefully planned to achieve a specific goal or solve a problem.
A project is temporary, with a defined beginning and end, scope, and resources.
A project is unique, not a routine operation, but a specific set of operations tailored to a singular goal.

Recall Past Projects

Reflect on prior projects from past subjects.
Consider planning, intended goals, initiation, termination, costs, and derived benefits.

Examples of Projects

Development of a prototype hydropower windpump.
Construction of wooden worktables for students.
Development of software for attendance checking.
Feasibility study of commercial buildings.
Purchase of agricultural machinery.
Construction of housing for broilers.
Construction of irrigation systems for farms.
Reblocking of farm-to-market roads.

Cash Flow Analysis

Determines the estimated annual costs and benefits of a project, along with the resulting annual cash flow.

Tangible Costs or Benefits

Costs or benefits that can be easily measured in monetary terms (dollars).

Intangible Costs or Benefits

Costs or benefits that are challenging to quantify in monetary terms.
- Costs: Resources used in research of the project that are not normally billed to the project.
- Benefits: Goodwill, improved prestige, and productivity.

Project Cost

An amount of money needed to compensate for acquiring a service or good.
Includes any expenditures made or estimated to be incurred to complete the project.
These costs are listed in a project baseline.

Cost Terminology

Cost estimates are typically categorized into direct costs and indirect costs.

Direct Costs

Costs that are directly associated with a specific product or activity.
Examples include salaries for project staff and materials required for the project.

Indirect Costs

Costs that are difficult to allocate to a specific output or work activity.
Examples include management, insurance, taxes, and maintenance costs.

Investment Cost

The initial capital required to start a project.
Example: acquiring land, designing, materials, labor, construction, and other services.

Fixed Costs

Costs that remain constant regardless of production, activity, or level.
Examples: Insurance and property taxes on facilities, general and administrative salaries, license fees, and interest on borrowed capital.

Variable Costs

Costs that fluctuate depending on the level of production or activity.
Example: Costs of materials and labor for output production.

Incremental Costs

Costs associated with an increase in output or the addition of units to a system.
Examples: Expanding a product line, changing output level, acquiring new materials, adding personnel.

Sunk Costs

Past costs that are irrelevant for decision-making.
These are costs that have already been incurred and cannot be recovered.
They should not be considered in future decision-making.
Example: Down payment on a computer set.

Opportunity Costs

The value of the next best alternative forgone when a particular choice is made.
These costs represent the value lost by choosing a certain course of action.
Example: Vacating warehouse space, and the potential lost income from alternative use of the area.

Cost Terminology (continued)

Costs, estimates are typically divided into Direct Cost, Indirect Costs.

Cost Estimation Approaches

Top-down approach (design-to-cost): Uses historical data from similar projects to estimate costs.
Bottom-up approach: Breaks projects down into smaller units for estimations and summation.
Integrated Approach: Uses a combination of approaches with a WBS.

Components of Integrated Approach

Work Breakdown Structure (WBS): A visual hierarchical representation of project tasks, facilitating resource allocation.
Cost and Revenue Structures: Provides categorization for estimations of future costs and revenues.
Estimating (models) techniques: Mathematical models use to obtain estimates.

WBS Examples

Construction of a House.
Harvest Festival Grand Opening.
Project Ventilate.
Book / Risk Management
Personal Computer.
Sample project example.

Phase-Based WBS

Dividing work associated with multiple elements into work unique to each Level 1 element.

Cost Structure elements

Tangible costs
Intangible benefits
Fixed costs
Variable costs
Labor costs
Material costs
Overhead Costs
Subcontracting costs
Logistics costs
Investment costs

Estimating techniques and considerations

Order of magnitude estimates: Provide ±30-50% accuracy in project planning, selecting alternatives, etc.
Semi-detailed estimates (budgets): Used in preliminary or conceptual design stage to support design effort and decision-making, accuracy in ±15%
Definitive (detailed) estimates: Detailed estimates, engineering and construction stage, used for bids, deciding on design decisions, accuracy ±5%
Itemized cost: Lists all projected costs: equipment, parts, supplies, labor, financing, fees, etc.

Gantt Charts

Visual representation of tasks scheduled over time.
Shows dependencies between tasks, providing a project timetable.

Estimate Considerations

Project size, length and location
Time of year, labor pool, and specialized equipment
Project quality, and other market conditions

Estimating Techniques

Level of detail and accuracy depends on available time/effort, item difficulty, estimator qualifications, sensitivity of results to factors or estimates, and the methods used.

Additional Notes

Importance of project team member identification.
WBS Dictionary definition, including descriptions of deliverables.
Relevant project documentation such as cost documents and schedules.
The need to practice estimating for improvement.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.