Cost estimation models
Encyclopedia
Cost estimation models are mathematical algorithm
s or parametric equations used to estimate the costs of a product or project. The results of the models are typically necessary to obtain approval to proceed, and are factored into business plans, budgets, and other financial planning and tracking mechanisms.
These algorithms were originally performed manually but now are almost universally computerized. They may be standardized (available in published texts or purchased commercially) or proprietary, depending on the type of business, product, or project in question. Simple models may use standard spreadsheet
products.
Models typically function through the input of parameter
s that describe the attributes of the product or project in question, and possibly physical resource requirements. The model then provides as output various resources requirements in cost and time.
Cost modeling practitioners often have the titles of cost estimators, cost engineers, or parametric analysts.
Typical applications include:
Algorithm
In mathematics and computer science, an algorithm is an effective method expressed as a finite list of well-defined instructions for calculating a function. Algorithms are used for calculation, data processing, and automated reasoning...
s or parametric equations used to estimate the costs of a product or project. The results of the models are typically necessary to obtain approval to proceed, and are factored into business plans, budgets, and other financial planning and tracking mechanisms.
These algorithms were originally performed manually but now are almost universally computerized. They may be standardized (available in published texts or purchased commercially) or proprietary, depending on the type of business, product, or project in question. Simple models may use standard spreadsheet
Spreadsheet
A spreadsheet is a computer application that simulates a paper accounting worksheet. It displays multiple cells usually in a two-dimensional matrix or grid consisting of rows and columns. Each cell contains alphanumeric text, numeric values or formulas...
products.
Models typically function through the input of parameter
Parameter
Parameter from Ancient Greek παρά also “para” meaning “beside, subsidiary” and μέτρον also “metron” meaning “measure”, can be interpreted in mathematics, logic, linguistics, environmental science and other disciplines....
s that describe the attributes of the product or project in question, and possibly physical resource requirements. The model then provides as output various resources requirements in cost and time.
Cost modeling practitioners often have the titles of cost estimators, cost engineers, or parametric analysts.
Typical applications include:
- ConstructionConstructionIn the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking...
- Software DevelopmentSoftware developmentSoftware development is the development of a software product...
- ManufacturingManufacturingManufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
- New product developmentNew product developmentIn business and engineering, new product development is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible or intangible...
See also
- Software development effort estimationSoftware development effort estimationSoftware development efforts estimation is the process of predicting the most realistic use of effort required to develop or maintain software based on incomplete, uncertain and/or noisy input...
- Estimation in software engineeringEstimation in software engineeringThe ability to accurately estimate the time and/or cost taken for a project to come in to its successful conclusion is a serious problem for software engineers. The use of a repeatable, clearly defined and well understood software development process has, in recent years, shown itself to be the...
- Parametric Estimating
- EstimationEstimationEstimation is the calculated approximation of a result which is usable even if input data may be incomplete or uncertain.In statistics,*estimation theory and estimator, for topics involving inferences about probability distributions...
- Elemental cost planningElemental cost planningElemental cost planning is a system of Cost planning and Cost control, typically for buildings, which enables the cost of a scheme to be monitored during design development....
- Cost overrunCost overrunA cost overrun, also known as a cost increase or budget overrun, is an unexpected cost incurred in excess of a budgeted amount due to an under-estimation of the actual cost during budgeting...
- Parametric modelParametric modelIn statistics, a parametric model or parametric family or finite-dimensional model is a family of distributions that can be described using a finite number of parameters...