Chapter 7, Problem 4DQ

Explanation of Solution

Example of preparing rough order:

• In order to provide new mobile devices for 50 people, we can have a cost estimate of around $25,000.
• It is important to have a detailed and accurate estimation rather than using a rough estimate.
• A rough order of magnitude estimate can be done 3 or more years earlier before completing the project.
• In order to take purchasing decisions on any project, we need to make fixed estimates for final project costs.
• For example, if projects require 1000 mobiles, initially they are planning to buy 50 mobiles in the next few months.
• For this we need a clear cost estimate for evaluating supplier proposals.
• The accuracy of this estimate is 5 percent loss or 10 percent more than the definitive estimate.

Examples of using tools or techniques for creating a cost estimate:

We have many tools or techniques to calculate ROM estimate. These tools and techniques are as follows:

Analogous estimate:

It uses the actual cost of mobile devices that have been purchased in any other organization or institutes...