Engineering Economic Analysis

--..--.--

Estimating Models 43

Total cost

Total cost for 10-day period =Transportation co,s!s+ Living costs + Entertainment costs

=316 + 3240 + 410__$3966

Thus, the cost per student would be $3966/24=$165.25.

Thus, it would cost you $165.25 per student to host the students at theisland campground for

the lO-day period. In this case the per-urtitmodel gives you a very detailed cost estimate (although

its accuracy depends on the accuracy of your data and assumptions you've made).

Segmenting Model

The segmenting model can be described as "divide and conquer." An estimate is decom-

posed into its individual components, estimates are made at those lower levels, and then the

estimates are aggregated (added) back together. It is much easier to estimate at the lower

levels because they are more readily understood. This approach is common in engineer-

ing estimating in many applications and for any level of accuracy needed. In planning the

camp trip of Example 2-5, the overall estimate was segmented into the costs for travel,

living, and entertainment. The example illustrated the segmenting model (division of the

overall estimate into the various categories) together with the unit factor model to make the

subestimates for each category. Example 2-6 provides another example of the segmenting

approach.

Clean Lawn Corp. a manufacturer of yard equipment is planning to introduce a new high-end

industrial-use lawn mower called the Grass Grabber. The Grass Grabber is designed as a walk-

behind self-propelled mower. Clean Lawn engineers have been asked by the accounting depart'-

ment to estimate the material costs that will make up the new mower. The material cost estimate

will be used, along with estimates for labor and overhead to evaluate the potential of this new

model.

:-..;..~ '--t~--t-:

. ".. ~-- '-.-'-.--:, -.' .., .' .;,-I' '.-';'SOLUTIO~~;:. .'.'~

:

The engineers decide to decompose the design specifications for the GraSs Grabber into its

subcomponents, estimate the material costs for each of the subcomponents, and then sum these

costs up tQobtain their overall estimate. The engineers are using a segmenting approach to build

up their estimate. Mter careful consideration; the engineers have divided the mower into the"

following$ajoHmbsystems: chassis, drive tram~'controls,'and cutting/coUectionsystem. Each of

these isfqrther divided as appropriate, and unjt material costs were estimated at this lowest of

• ~ - .. - - --- -- -- - - - --..

,11;:.; -. (^1) \ ;: ~~ ~.;,...).s~.~~.-~~~)-- ~ -":" ~ - --=-,~ .::;;"