Question

You are the project manager of a deck-building project. You are about to estimate costs, and immediately after, you need to determine the budget.

The project plan has listed five estimation techniques (analogous, parametric, bottom-up, three-point estimate (PERT) and reserve analysis) as the techniques to be used. During your calculations please specify the technique used in each case. The cost management plan also shows control accounts are on level 1 of the WBS, precision levels are 0 decimals (round up) and management reserve is 5% (of your cost baseline) based on company policy.
For the estimation process, you have gathered the following information:
For the preparation of the site, you have been quoted, $256 and $300 for clearing site and debris removal respectively.
You worked on a similar project a month ago, 0nly twice the area, and the dig of the footings cost $2,000.
The building of the frame and the laying of the deck will take 5 human resources at $17 an hour for 3 days (8 hours a day) and the material was quoted as $2500
A new hire of the company will perform the sealing of lumber. You asked for three estimates as it is your first time working with the new employee. He said the longest it will take him to perform this task is 5 days, the shortest is 1. However, in his experience, it should take 4 days. He will get paid $17 an hour (8 hours a day) and the total cost of material is $500.
The scrap removal was estimated to cost $1,000 but there was risk identified. During the quantitative risk analysis, this task presented 50% cost increase if the risk happens. The risk had a 60% chance of happening.
1) What are the estimates of each control account? Show your work and specify the type of estimate used.
Site Preparation =
Construct Deck =
2) What is the Total cost of the project?
3) What is the Cost Baseline? is there any applicable contingency reserve?
4) How much is the Management Reserve?
5) What is the Total Budget?

Answer 1

The estimates for each control account are as follows:

The total cost of the project is $5,096. The cost baseline is $5,096 without any contingency reserve. The management reserve is $254.80. The total budget is $5,350.80.

Step-by-step explanation:

Estimating Costs and Determining Budget for a Deck-Building Project

Estimating costs and determining the budget are crucial steps in project management. There are several estimation techniques that can be used, including analogous estimation, parametric estimation, bottom-up estimation, three-point estimate (PERT), and reserve analysis. The cost management plan provides guidelines for estimating costs and includes information about control accounts, precision levels, and management reserves.

Control accounts are typically defined at level 1 of the Work Breakdown Structure (WBS) and represent a specific area of the project where costs can be tracked. Precision levels determine the number of decimal places used in cost calculations, and management reserves are set aside as a contingency based on company policy.

To estimate costs, project managers gather information about various project activities and use the appropriate estimation technique to calculate the cost for each control account. In this case, the estimation techniques used for the control accounts are as follows:

The total cost of the project is the sum of the costs for all control accounts. In this case, the total cost of the project is $5,096 ($256 + $300 + $2,000 + $2,040 + $2,500).

The cost baseline represents the approved budget for the project. It does not include any contingency reserve. In this case, the cost baseline is $5,096.

The management reserve is set aside as a contingency based on company policy. It is calculated as 5% of the cost baseline. In this case, the management reserve is $254.80 (5% of $5,096).

The total budget is the sum of the cost baseline and the management reserve. In this case, the total budget is $5,350.80 ($5,096 + $254.80).