Cost Estimation Techniques - Cost estimation in the Design Process
3 important questions on Cost Estimation Techniques - Cost estimation in the Design Process
Give the [4] basic steps of CER | Cost Estimating Relationships
- Problem definition
- Data collection and normalization
- CER equation development
- Model validation and documentation
What is much used in CER equation development?
Linear regression (OLS) and plotting data. Use software if possible.
A common technique is the method of least squares which seeks to determine a straight line through the data that minimizes the total deviation of the actual data from the predicted values.
A common technique is the method of least squares which seeks to determine a straight line through the data that minimizes the total deviation of the actual data from the predicted values.
Explain the concept of target costing
Top-down approach
The allowable cost is set as an input for the design process. Break down a product to components and redesign if estimated costs exceed allowable ones.
Target Cost = Competitors price - Desired Profit
Through market analysis, an estimated price point is set for the new product.
The allowable cost is set as an input for the design process. Break down a product to components and redesign if estimated costs exceed allowable ones.
Target Cost = Competitors price - Desired Profit
Through market analysis, an estimated price point is set for the new product.
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