Cost Estimation Quiz

Question 1                                     10 pts

A 2000-gallon metal tank   to hold hazardous materials cost $200,000 when it was fabricated  15 years ago. What would a 5,000-gallon tank cost today if the power–sizing exponent is 0.575 and the construction cost index for such facilities has increased from 180 to 600 over the last 15 years? Choose the closest value.

• $1,123918
• $666,667
• $337,175
• $222,222

Question 2                            10 pts

An example for variable cost in a typical manufacturing plant is ______________.

• Property taxes
• Building cost
• Equipment cost
• Labor cost

Question 3       10 pts

Which of the following approaches would be appropriate for cost estimation in the planning/preliminary phase of the project? 

• Bottom-up
• Top-down

Question 4                      10 pts

The learning curve percentage may be as 80% if the learning curve exponent is given as

-0.3214.

• True
• False

Question 5                       10 pts

The breakeven volume is the quantity for which the unit cost is minimized.

• True
• False

Question 6                      10 pts

The first unit produced in a plant took about 10 hours. If the learning curve is 95%, the time required to produce the 8th unit may be estimated to be ________.

• 6.30 hours
• 8 hours. 
• 7.6 hours
• 8.57 hours

 Question 7                  10 pts

Maximum profit is always obtained at the point of maximum total revenue.

• True 
• False 

Question 8                           10 pts

Total fixed cost = $420.         Variable cost/unit = $20                     Revenue/unit     = $30.

The breakeven volume is _____________.

Assume that the price and demand are not dependent of each other.

• 42
• 21
• 14
•  32

 Question 9           10 pts

Please match the definitions of various types of costs indicated below.

_____ costs are those that have occurred in the past and have no relevance to estimates of future costs and revenues.

_____ costs are incurred because of the use of limited resources such that the ability to use those resources to monetary advantage in another way is foregone.

_____ costs are those which are unaffected by changes in activity level over a feasible range of operations for the capacity available.

_____ costs, in total, change in relation to the quantity of output or other measures of activity level.

_____ cost refers to the additional cost that will result from increasing the output of a system by one or more units.

_____ costs are those that are repetitive and occur when goods or services are produced on a continuing basis.

_____ costs can be reasonably measured and allocated to a specific output or work activity.

_____ costs are not repetitive even though the total expenditure may be cumulative over a relatively short period of time.

Question 10         10 pts

ABC Engineering Inc. is planning to purchase a new excavator and has historical price information for an excavator of a different capacity. Which of the following cost estimation technique will most likely be applied?

• Power-sizing technique
• Learning curve
•  Factor technique
• Unit technique