Page 8 - Managerial Accounting-MGT 145

Module 1: Cost Measurement and Estimation

Solution to Module 1. REQUIREMENT

1. Estimating is a prediction or forecast of resources (Time, Cost
Labor and Materials) required to achieve an agreed upon
scope of project of work.

2. The role of a cost estimator is to predict cost of a project for
a defined scope, to be completed at defined location and

point in time. They assists in economic evaluation of
potential projects and collect and analyze data.

3. Estimates must be detailed, organized and archived because
estimates create strong budget and performance
expectations. Clients will hold the organization accountable in
providing estimates that are consistent with the project
design and accuracy of estimates will be a factor in
determining organization financial success.

4. The different classes of estimate are the following:

Class – 5 : conceptual/screening – factored/parametric.
Class – 4 : Study/Feasibility – equipment factored/parametric.
Class – 3 Budget/Authorizing/Control – semi detailed line items.
Class – 2 Control/Bid Tender – detailed unit costs/ forced take off
Class – 1: Check estimate – detailed take off