These notes provide an in-depth exploration of the different types of cost estimation models, the reasons why cost estimation is crucial, and various approaches to estimating costs. Each model is illustrated with solved examples, helping to clarify the application of different methods in real scena...
ENGINEERING COSTS
CONCEPTS
AND
COST ESTIMATING
MODELS
• Engineering Economy, William G. Sullivan, Elin M. Wicks, C.
Patrick Koelling; chapter 2 & 3
• Engineering Economic Analysis, Donald G. Newnan, Ted G.
Eschenbach, Jermo P. Lavelle; chapter 2
, Why do we estimate cost?
Estimating the future cash flows
for feasible alternatives is a
critical step in engineering
economy studies. Estimating
costs, revenues, useful lives,
residual value, and other
pertinent data can be the study's
most difficult, expensive, and
time-consuming part.
, COST ESTIMATION APPROACHES
There are two fundamental approaches to cost
estimation:
The “Top-
Down” The
approach – “Bottom-Up”
when approach –
historical when no
data is historical
available. data is
available.
3
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