Final answer:
Work package cost estimates should include resource/material costs, quality costs, and risk response costs. Additionally, understanding both explicit and implicit costs is vital for creating accurate estimates. The estimated costs must be well-documented and normalized for comparison with other options.
Step-by-step explanation:
Work package cost estimates should encompass a variety of costs to ensure that all aspects of the work are accounted for in the budgeting process. These costs include:
- Resource/material costs: This refers to the explicit costs necessary for the physical execution of the project, including materials, equipment, and labor.
- Communications costs: These are typically part of the overhead and can include expenses related to coordination and dissemination of information.
- Quality costs: Costs associated with ensuring that the project meets the quality requirements, including testing, inspections, and compliance.
- Risk response costs: These costs are related to mitigating potential risks that may affect the project. This can include insurance, safety measures, and contingency plans.
When creating a mathematical model to estimate these costs, it's crucial to consider both explicit and implicit costs. Explicit costs are the direct, out-of-pocket payments such as wages and rent, while implicit costs represent the opportunity costs of using owned resources, such as the depreciation of equipment or loss of potential income from alternate use of those resources.
For a comprehensive work package estimate, all these types of costs need to be included and normalized for comparison purposes. This allows for an accurate prediction of expenses and informs the decision-making process throughout project development.