Page 9 - Managerial Accounting-MGT 145

Module 1: Cost Measurement and Estimation

Solution to Module 1. REQUIREMENT

5. The difference between stochastic and deterministic
methodology is that, Stochastic use something other

than a direct measure of an item being estimated as
independent variable, this method is based on
factors, metrics and models while Deterministic use

independent variable is a definitive measure of the
item being estimated, it may include quotes and bids.

5. List of six (6) risks that affects estimate accuracy:
- Unfamiliarity with process technology.

- Complexity of the project.
- Quality of cost historical data.

- Experience and skill level of the estimate.
- Estimate techniques employed.
- Time and level of effort used to develop estimate.

7. Estimate variability is affected by 3 items which are

Quantity, Cost and Price, the third one is usually
dependent on the other two.