People conflate the terms costing and cost estimating. Both are distinctive from the other while mutually dependent. In this video, learn about the difference between organizational costs or expenses from the process of cost estimating.
- For most people, the purchase price is the cost, … that is, they think the number on the price tag … is all they pay to get that product or service. … But I'm sure you know what I'm going to say, … that's wrong, well, sort of. … If you buy a head of lettuce … there's probably no other costs really associated … with using that lettuce, same with other small items, … but when you make a major purchase, things quickly change. … I bought my first car at 17 … only looking at the list price. … But my dad asked if I considered all of the costs … like maintenance, insurance, fuel costs, … and a contingency as something went wrong. … I quickly realized the price … which was the initial cost of the car … was not my final cost. … I failed to calculate the lifecycle cost … or the total cost of ownership over time. … It's understandable, people, even financial professionals … misunderstand the term cost and how to estimate it. … So let's clarify. … We need to take our understanding of the term cost …
- Describe the limitations in reaching 100 percent accuracy in cost estimates.
- Differentiate between nominal, ratio, and ordinal data.
- Relate the reason for credible cost estimates to a company’s business needs.
- Determine situations in which a business would use the top-down estimating approach.
- Examine the validity of data and data collection given a scenario.
- Explore the differences between cost, value, and performance.