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Segmenting Model
Splits the tasks of the product/service into different
segments. Then the cost of each segment is to be
estimated and finally, the cost of the product is
obtained by summing the costs of all the segments of
the product/service.
Example: if we consider the cost of a two-wheeler-motor
cycle or scooter-its different subsystem/segment are
engine, frame, electrical system, break system, sound
system, silencer, transmission system, fuel supply
system, etc. Under this system, the estimator should
estimate the cost of each of the segments and sum
Cost Indexes
The prices of commodities increase/decrease over a period of time.
Though both options are possible, most of the time the process
increase. Such changes can be used to estimate the cost of a product
based on the cost of that product in the past and consumer price index
(CPI).
Continue.
The formula is given by
P2 = Cost of the product at time T1 *(
This method helps the estimator to avoid repeating the detailed estimate
as done at time T1. But it will carry some error.
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Let,
the 10 HP engine be product X1 and its cost be P1, and let the 20 HP engine be product X2, and its
cost be P2. The cost of the product X2 can be determined using the following formula. (Here, 10 HP
engine is considered to be a comparable unit):
Cost of X2 = Cost of X1 *( )k
Where
Cost of X2 = cost of 20 HP engine
Cost of X1 = cost of 10 HP engine
Size of X1 = 10 HP
Size of X2 = 20 HP
k = exponent which indicates the economy of scale
If k = 1, there is no economy of scale and if k > 1, it represents the scale of diseconomy.
Let the cost of X1 be $ 20,000 and the scale of economy k be 0.8. Hence , the cost of X2 = $ 20,000 *
( 20/10 )0.8 = $ 34,822.02.
The size of the product may be physical size of the product or capacity of the product or any other
comparable unit.
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If
N is the number of units produced initially, the time required to complete
2N units will be a fixed percentage of the time required to produce N units,
for all positive values of N.
The formula to compute the time of completing N units is given by
Time of completing N units, TN = T1 * Nk
Where
N = number of units to be produced
T1 = time to complete one unit
TN = time to complete N units
k = learning curve exponent which is given by the formula:
k=
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Example
If the time to complete one unit of a task is 20 min and the learning curve rate is 80%, find
the time to complete the 50th unit of that task.
Solution
Time to complete the first unit of the task, T1 = 20 minutes
Learning curve rate = 80 % = 0.8
Learning curve exponent, k = log (learning curve rate) / log 2.0
= log (0.8)/log 2.0
= -0.3219
Time to complete the 50th unit of the task = T1 * Nk
= 20 * (50-0.3219)