Project 2
All too often
projects make headlines for being financial disasters. A government
investigation revealed that more than one quarter of large projects finished
over their capital cost limit (HM Treasury, 1995). Research projects are among
cost sensitive projects that can easily exceed their budgets. Full Economic
Costing (FEC) of research is way to estimate a research cost and control
spending. An important part of FEC is cost estimation. Companies and colleges
such as Sinclair college often bring their experiments to the University of
Dayton. They can rent labs. Minimum period of rental is 1 hour. Renters will
specify machines they will use, so they should not be charged for all machines
in the lab. University of Dayton wants to estimate the hire charge for the
material and machining labs. Your project can help researches to have a better
estimation before writing a proposal.
You will develop an Excel
based software (or cost spreadsheet). Development costs that are onetime costs
that will not recur after the project has been completed are not considered in
your project.
Your excel file should include:
1. You should identify sources of the costs.
2. Operating costs:
Costs that tend to recur, such as:
• Fixed costs — occur at regular intervals but at
relatively fixed rates.
• Variable costs — occur in proportion to some
usage factor.
3. Cost breakdown model.
Figure 1 Cost
breakdown example adopted from Cheung and Scanlan (2009)
4. Calculate all the cost per
hour so all customers need is to select the machines and provide time duration
they need the labs.
For your reference you can review: An Aerospace Component Cost Modelling
Study for
Value Driven Design By: Cheung, Scanlan, Wiseall- 2009
NASA Cost Handbook -2008 (Available online!)
Solution
Cost
Estimation
Cost Estimation
1. Identify the sources of cost
There are mainly two
sources of the cost that the University of Dayton will use. The sources of
cost given below,
·
Per unit model
·
Segmenting model
·
Cost indexes
These are the sources
that may use for the estimation of cost. Per unit,
the model cost is one of the ways to estimate the cost. In per unit model
cost estimate for a single unit made (Germain, Gregor, Murray, &
Larochelle, 2015) .
Then is segmenting model, segmenting model is one of the ways to estimate the cost for partitioning total tasks into segments. After
that there are cost indexes; the cost
index is one of the ways to estimate the
current cost.
2. Operating costs
It includes fixed cost
and variable cost when the University of Dayton will estimate the cost of
hire charge material and machines they will estimate
fixed as well as variable cost.
3. Cost breakdown model
Fixed
cost
|
1.
Equipment
|
|
|
Cost
per machine
|
100$
|
|
Number
of machines
|
10
|
|
Equipment
time
|
|
|
2.
Maintenance
|
200$
|
|
3.
Invested Capital
|
|
|
Buildings
|
200$
|
|
IT
|
300$
|
|
Project
tooling
|
100$
|
|
|
|
Variable
Cost
|
1.
Labor
|
|
|
Direct
cost
|
400$
|
|
Indirect
cost
|
400$
|
|
Labour times
|
60$
per hour
|
|
2.
Scrap
|
80$
|
|
3.
Materials
|
|
|
Cost
rates
|
40$
|
|
Design
attributes
|
50$
|
4. Calculate cost per hour
i.
Cost per hour of machine
Cost per hour of a machine is calculated through total
cost of the machine by number of total hours. Now, for example cost of one
machine is 100$ total number of used machine in a lab are 10. So, if two
machines will be used total cost of machine will be 200$. On the other hand, if
total number of hours will be 40 then cost per hour of a machine will be 5$.
Cost per hour of machine=
total cost of machine/ number of total hours
= 200/
40= 5$
ii.
Cost per hour of lab attendant
Now, cost per hour of the labor attendant can be
calculated by dividing total cost of a lab attendant per day by per hour cost.
For example, there is 4 lab attendant; each one cost is 100$. However, one time only
one lab attendant will be there for duty. If university fix per hour cost of
lab attendant is 4$ and total number of lab attendant are 4. Cost is 100 so,
cost per hour of lab attendant will be 25$.
Cost per hour of lab
attendant= Total cost of the day/ per hour cost
100/4=
25$
References
Germain, M., Gregor, K., Murray, I., & Larochelle, H.
(2015). Made: Masked autoencoder for distribution estimation. In
International Conference on Machine Learning., 881-889.
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