Final answer:
True, a cost estimate does establish the baseline for project costs at different development stages. It involves creating mathematical models for cost prediction and understanding cost structure, including fixed, marginal, and average costs, for accurate baseline establishment.
Step-by-step explanation:
The statement that a cost estimate establishes the base line of the project cost at different stages of development of the project is true. Mathematical models are utilized in the design process to generate rough cost estimates for various approaches and alternative solutions. These models help link the underlying science to the cost of implementation, including materials, fabrication, operation, and maintenance. After estimations are calculated, costs need to be normalized, such as to cost per thousand gallons of water, to compare them against other options.
Practicing the art of estimation requires understanding how different variables may relate. Knowing how to break down total costs into fixed costs, marginal costs, average total costs, and average variable costs can provide valuable insights into a firm's operations. These measures help in developing a realistic and accurate baseline for project costs. Estimation is not random guessing; it involves prior experience, recognition of the correct physical principles and variables, and is instrumental in conducting sanity checks on calculations or proposals.