Question

In this you will be answering question on the following topics:

• Cost Management: Planning the cost of projects
• Estimating costs
• Determining a budget
• Cost controls

Question 1

What is a fixed cost and a variable cost?

1. Define each
2. Give an example of each at a cookie factory
3. Give a pro and a con of each: a fixed cost and a variable cost.

Answers need to be full sentences

Question 2

What is Analogous Estimating and Parametric Estimating and Bottom up Estimating?

1. Define each
2. You are thinking about opening a cookie cookie factory. Give an example of how you might do Analogous Estimating and Parametric Estimating and Bottom up Estimating
3. Give a pro and a con of each: Analogous Estimating and Parametric Estimating and Bottom up Estimating

Answers need to be full sentences. I recommend looking up each term online for better definitions and examples. Do not copy out of the book or from the internet. Please use your own word.  

Answer 1

Answer:-

Question 1.

1.Fixed Cost:-Fixed cost is the cost that is incurred irrespective of the number of units manufactured.It does not change with the change in number of units manufactured.Examples of fixed cost are rent,insurance,etc.

Variable Cost:-Variable cost vary with the change in number of units manufactured. They are incurred everytime an additional unit is manufactured.When production increases variable costs increase and when production is decreased,vaiable costs are also decreased.Examples of variable cost are direct material,labour,etc.

2.Examples of Fixed Costs at cookie factory are rent,interest on capital,salary,insurance premium,etc

Examples of Variable costs at cookie factory are direct material i.e.,flour,sugar,essence,etc.,direct labour,etc.

3.Fixed Cost

Pros:-Fixed costs do not increase with the increase in number of units.Hence per unit cost is reduced when goods are produced in large quantity.

Cons:-Fixed costs will be incurred even if there is no production.When the production will decrease, fixed cost per unit will increase.

Variable Cost:-

Pros:-Variable costs are incurred when a unit is produced i.e,they change with the change in production.Hence, they serve as a basis of cost control and management decisions.

Cons:-Variable costs have direct relation with the number of units produced. Hence, per unit cost will not decrease with the increase in production.

Question 2

1.Analogous Estimating:-It is a method of estimating duration or cost of a current project by taking similar past project as a base.When more past data is available, the estimate will be better.

Parametric Estimating:-In this method,estimation of duration or cost of a project is determined by relationship between variables.It is more accurate when the data is in numbers.It is a technique in which unit cost is multiplied by the number of units.

Bottom up Estimating:-In this method the project is borken down into lowest level of details and costs for each details are estimated. These estimates are then summed up to arrive at the total project cost.It is the most accurate method of project cost/duration estimation.