PROJ 592 Week 2 Assignment; Problems

PROJ 592 Project Cost and Schedule Control – DeVry

Instructions: Please complete all 3 multi-part problems for this week’s assignment.

2-1 Basic Estimating Problem
Your company is installing a new piece of machining equipment and a robotic arm. Your manager asks for the project costs by cost category as well as the total amount. Given the following information, develop a base cost estimate by grouping costs by Equipment / Material (items 1 – 4), Installation / Labor (items 5 and 6), and Overhead (items 7-9). Two pieces of equipment costing $ 15,000 and $ 35,000 Material required for electrical hook-up is 400 feet at $ 25 per foot Controls for each piece of equipment are estimated at $ 600 each Required start-up material is 3,700 pounds at $ 2.70 per pound Company labor for installation requires two maintenance specialists for two days at eight hours per day and $ 35 per hour Contract labor is estimated at a fixed price of $ 7,500 Engineering is estimated to be 15% of (equipment / material) cost based on past experience Inspection is estimated to be 3% of (labor) cost based on past experience General and Administrative expenses are estimated to be 5% of the total of (equipment / material) and (labor) based on past experience.


Note:  For this problem, only items 5 and 6 are considered “labor” for the purpose of calculating items 8 and 9.
2-2 Three-point Estimate Problem  
(a)  A project requires the use of structural steel in several tasks over the 12 month period expected to complete the work. Based on recent experience the most likely price for the material is $0.30/lb. There are, however, price fluctuations over time based on suppliers used and structural steel availability. The most optimistic price estimate is $0.24/lb., and the most pessimistic estimate is $0.62/lb.
Use the three-point estimating process to determine the expected price of the material.
(b)  In addition to price fluctuations, it is also uncertain how much of structural steel will be required for the project. Design uncertainties and waste at the project site will affect the amount of structural steel actually needed. The most likely amount required is 40 tons. However, as little as 37 tons and as much as 49 tons might be required.  One ton = 2000 lbs.
Use the three-point estimating process to determine to determine the expected amount of structural steel needed for the project?
 (c)  Using the estimates from 1 & 2, what is the expected cost for structural steel over the life of the project?
 (d)  Using the “Complex” three-point method, what is the expected cost for structural steel over the life of the project?

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