8.1 Describe an environment in which it would be common to bid for contracts with low-profit margins. What does this environment suggest about the competition levels?
8.2 How has the global economy affected the importance of cost estimation and cost control for many project organizations?
8.3 Why is cost estimation such an important component of project planning? Discuss how it links together with the Work Breakdown Structure and the project schedule.
8.4 Imagine you are developing a software package for your company’s intranet. Give examples of the various types of costs (labor, materials, equipment and facilities, subcontractors, etc.) and how they would apply to your project.
8.5 Give reasons both in favor of and against the use of a personal time charge as a cost estimate for project activity.
8.6 Think of an example of parametric estimating in your personal experience, such as the use of a cost multiplier based on a similar, past cost. Did parametric estimating work or not? Discuss the reasons why.
8.7 Suppose your organization used function point analysis to estimate costs for software projects. How would the expertise level of a recently hired programmer affect your calculation of their function points on a monthly basis when compared to an older, more experienced programmer?
8.8 Put yourself in the position of a project customer. Would you insist on the cost adjustments associated with learning curve effects or not? Under what circumstances would learning curve costs be appropriately budgeted into a project?
8.9 Consider the common problems with project cost estimation and recall a project with which you have been involved. Which of these common problems did you encounter most often? Why?
8.10 Would you prefer the use of bottom-up or top-down budgeting for project cost control? What are the advantages and disadvantages associated with each approach?
8.11 Why do project teams create time-phased budgets? What are their principal strengths?
8.12 Project contingency can be applied to projects for a variety of reasons. List three of the key reasons why a project organization should consider the application of budget contingency
8.13 Calculate the fully loaded cost of labor for a project team member using the following data:
Hourly rate: $17.50/hr
Hours needed: 200
Overhead rate: 35%
8.14 Calculate the fully loaded cost of labor for a project team member using the following data:
Hourly rate: $52/hr
Hours needed: 120
Overhead rate: 60%
8.15 Calculate the fully loaded cost of labor for your Project Engineer using the following data:
Hourly rate: $40/hr
Estimated hours of work: 120
Overhead rate: 65%
Personal time: 15%
8.16 Calculate the fully loaded cost of labor for the project team using the following data. What are the costs for the individual project team members? What is the fully loaded cost of labor?
Name
Hours
Needed
Overhead
Charge
Personal
Time Rate
Hourly
Rate
Fully
Loaded
Labor
Cost
Sandy 60 1.35 1.12 $18/hr
Chuck 80 1.75 1.12 $31/hr
Name
Hours
Needed
Overhead
Charge
Personal
Time Rate
Hourly
Rate
Fully
Loaded
Labor
Cost
Bob 80 1.35 – 0 – $9/hr
Penny 40 1.75 1.12 $30/hr
Total Fully Loaded Labor Cost =
8.17 Assume that overhead is charged on a flat-rate basis. Each member of the project is assigned an overhead charge of $150/week. What would the fully loaded cost of labor be for an employee, given that she is assigned to the project for 200 hours at $10.50/hour?
8.18 Calculate the fully loaded labor costs for members of your project team using the following data. Who is the most expensive member of your team? What proportion of the overall fully loaded cost of labor is taken up by this individual?
Name
Hours
Needed
Overhead
Charge
Personal
Time Rate
Hourly
Rate
Fully
Loaded
Labor
Cost
Todd 200 1.55 1.15 $32/hr
Stan 200 1.75 – 0 – $15/hr
Mary 150 1.55 – 0 – $24.5/hr
Alice 80 1.75 1.15 $30/hr
Total Fully Loaded Labor Cost =
8.19 Using the following information about work package budgets, complete the overall time-phased budget for your project. (All cost figures are in $000s). Which are the weeks with the greatest budget expense? For Problems 8.21 through 8.23, refer to the following chart of learning curve coefficients (unit and total time multipliers). The simplified formula for calculating learning rate time using the table coefficients is given as:
TN = T1C
where
TN = Time needed to produce the nth unit
T1 = Time needed to produce the first unit
C = Learning curve coefficient
8.21 It took MegaTech, Inc., 100,000 labor hours to produce the first of several oil-drilling rigs for Antarctic exploration. Your company, Natural Resources, Inc., has agreed to purchase the fifth (steady state) oil-drilling rig from MegaTech’s manufacturing yard. Assume that MegaTech experiences a learning rate of 80%. At a labor rate of $35 per hour, what should you, as the purchasing agent, expect to pay for the fifth unit?
8.22 Problem 8.21 identified how long it should take to complete the fifth oil-drilling platform that Natural Resources plans to purchase. How long should all five oil-drilling rigs take to complete?
8.23 Suppose that you are assigning costs to a major project to be undertaken this year by your firm, DynoSoft Applications. One coding process involves many labor hours, but highly redundant work. You anticipate a total of 200,000 labor hours to complete the first iteration of the coding and
a learning curve rate of 70%. You are attempting to estimate the cost of the twentieth (steady state) iteration of this coding sequence. Based on this information and a $60 per hour labor rate, what would you expect to budget as the cost of the twentieth iteration? The fortieth iteration?
Table for Problem 8.19
Task Budget Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8
A 5 3 2
B 8 1 4 3 1
C 12 2 7 3
D 7 3 3 1
E 14 5 5 2 2
F 6 1 2 3
Plan 52 4 8
Cumulative 4 12
8.20 Given the following information, complete a time-phased budget for your project. (All cost figures are in $000s). What are the weekly planned and cumulative costs for the project?
Table for Problem 8.20
Work Package Cost per Week
Work Package Budget Week 1 Week 2 Week 3 Week 4 Week 5
Staffing 9 7 2
Blueprinting 16 4 10 2
Prototyping 17 2 10 4 1
Full Design 30 4 12 14
Learning Curve Coefficients (Unit Time and Total Time Multipliers)
70% 75% 80% 85%
Steady
State Unit Unit Time Total Time Unit Time Total Time Unit Time Total Time Unit Time Total Time
5 .437 3.195 .513 3.459 .596 3.738 .686 4.031
10 .306 4.932 .385 5.589 .477 6.315 .583 7.116
15 .248 6.274 .325 7.319 .418 8.511 .530 9.861
20 .214 7.407 .288 8.828 .381 10.485 .495 12.402
25 .191 8.404 .263 10.191 .355 12.309 .470 14.801
30 .174 9.305 .244 11.446 .335 14.020 .450 17.091
35 .160 10.133 .229 12.618 .318 15.643 .434 19.294
40 .150 10.902 .216 13.723 .305 17.193 .421 21.425
Based on a = 1.
8.24 Assume you are a project cost engineer calculating the cost of a repetitive activity for your project. There are a total of 20 iterations of this activity required for the project. The project activity takes 2.5 hours at its steady state rate and the learning rate is 75%. Calculate the initial output time for
the first unit produced, using the learning curve formula:
Yx = aXb
where
Yx = the time required for the steady state, x, unit of
output
a = the time required for the initial unit of output
X = the number of units to be produced to reach the
steady state
b = the slope of the learning curve, represented as: log
decimal learning rate/log 2
8.25 As the manager of the IT group at your insurance firm, you have been asked to develop a cost estimate for upgrades to the computerized accident-reporting and claims adjustment system you have in place. Your system is basic, without many features, but it needs some general modifications based on complaints from customers and claims adjusters at your firm. You know that your programmer is capable of handling 3 function points in a person-month and your programmer makes $60,000, so her cost is $5,000 per month. The costs for the project are based on the following requirements:
Function Number of Screens Complexity
Input 9 Medium
Output 4 Low
Interfaces 7 Medium
Queries 7 High
Files 12 Low
The complexity weighting for these functions follows a standard formula:
Complexity Weighting
Function Low Medium High Total
Number of Inputs 1 * = 2 * = 3 * =
Number of Outputs 2 * = 6 * = 10 * =
Number of Interfaces 10 * = 15 * = 20 * =
Number of Queries 3 * = 6 * = 9 * =
Number of Files 1 * = 3 * = 5 * =
Calculate the total estimated number of function points for this project. What is the total expected cost of the project?
8.26 You work at a regional healthcare center and have been asked to calculate the expected cost for a software project in your organization. You know that historically, your programmers have been able to handle 5 function points each person-month and that the cost per programmer in your company is $4,000 per month. The project whose costs you are estimating is based on the following requirements:
Function Number of Screens Complexity
Input 8 Low
Output 6 Low
Interfaces 15 High
Queries 5 High
Files 25 Medium
Further, you know that the complexity weighting for these functions follows a standard internal formula, shown as:
a. Calculate the total estimated number of function points for this project.
b. Calculate the total expected cost of the project.
Complexity Weighting
Function Low Medium High Total
Number of Inputs 2 * = 4 * = 6 * =
Number of Outputs 3 * = 6 * = 12 * =
Number of Interfaces 6 * = 12 * = 18 * =
Number of Queries 4 * = 6 * = 8 * =
Number of Files 2 * = 4 * = 8 * =
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
