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Cost Estimation

5 minutes 5 Questions

Cost estimation involves predicting the financial resources required to execute a project. This refers to the process of determining the cost of every task involved in the project, which collectively add up to the project's overall cost. The estimate has to consider aspects like labor costs, cost o…

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CAPM - Cost Estimation Example Questions

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Question 1

You are overseeing a city infrastructure project with an initial estimated cost of $5 Million. Due to an unprecedented labor strike, an increase of 10% is anticipated. What is the new cost estimate?

Correct Answer: $5,500,000

The correct estimate after a 10% increase on an initial cost of $5 Million would indeed be $5.5 Million (calculated by multiplying the initial cost by the increase percentage and then adding the result to the initial cost). Hence, id 156174 with answer $5,500,000 is correct. The other options are incorrect because they do not reflect a 10% increase on the initial $5 Million. The $5,000,000 does not represent any increase, the $5,250,000 only reflects a 5% increase, and the $6,000,000 is a 20% increase instead.

Question 2

You are a project manager for an Industrial Construction project which was initially estimated to cost $7 Million. During the project, unforeseen soil complications increased the cost by 18%. What is the new cost estimate?

Correct Answer: $8.26 Million

In the given problem, the original project cost is $7 Million. The cost of the project increased by 18% due to unforeseen soil complications. To find the new estimated cost, we need to calculate 18% of the original cost and add it to the original cost. The calculation is as follows: 18% of $7 Million which equals $1.26 Million. Adding this to the original budget of $7 Million, gives us a total of $8.26 Million. This is why '$8.26 Million' is the correct answer. The answer '$8 Million' is incorrect because that is not the correct calculation of 18% increase on $7 Million. The answer '$7.18 Million' is wrong because it seems like a 2.6% increase on the original cost instead of 18%. Lastly, '$7.8 Million' is incorrect because it does not correctly represent an 18% increase on $7 Million.

Question 3

Your project has an estimated cost of $80,000. Due to some unexpected natural calamity, it was required to incorporate additional safety measures leading an increase of 25%. What would be the new cost estimate?

Correct Answer: $100,000

The original cost estimate was $80,000. A rise of 25% due to incorporating additional safety measures would mean an increase of 0.25*80000 which equals $20,000. Hence, the new project cost would be 80000 + 20000 = $100,000. Answers '$80,500', '$120,000', and '$90,000' are incorrect as they do not accurately represent the 25% increase in the original cost estimate.

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