ENGINEERING COSTS
CONCEPTS
AND
COST ESTIMATING
MODELS
• Engineering Economy, William G. Sullivan, Elin M. Wicks, C.
Patrick Koelling; chapter 2 & 3
• Engineering Economic Analysis, Donald G. Newnan, Ted G.
Eschenbach, Jermo P. Lavelle; chapter 2
, Why do we estimate cost?
Estimating the future cash flows
for feasible alternatives is a
critical step in engineering
economy studies. Estimating
costs, revenues, useful lives,
residual value, and other
pertinent data can be the study's
most difficult, expensive, and
time-consuming part.
, COST ESTIMATION APPROACHES
There are two fundamental approaches to cost
estimation:
The “Top-
Down” The
approach – “Bottom-Up”
when approach –
historical when no
data is historical
available. data is
available.
3
CONCEPTS
AND
COST ESTIMATING
MODELS
• Engineering Economy, William G. Sullivan, Elin M. Wicks, C.
Patrick Koelling; chapter 2 & 3
• Engineering Economic Analysis, Donald G. Newnan, Ted G.
Eschenbach, Jermo P. Lavelle; chapter 2
, Why do we estimate cost?
Estimating the future cash flows
for feasible alternatives is a
critical step in engineering
economy studies. Estimating
costs, revenues, useful lives,
residual value, and other
pertinent data can be the study's
most difficult, expensive, and
time-consuming part.
, COST ESTIMATION APPROACHES
There are two fundamental approaches to cost
estimation:
The “Top-
Down” The
approach – “Bottom-Up”
when approach –
historical when no
data is historical
available. data is
available.
3
