From the course: Accounting Foundations: Cost Estimating
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Establishing credible cost estimates
From the course: Accounting Foundations: Cost Estimating
Establishing credible cost estimates
- A few years back, people heard the US Department of Defense was buying $600 hammers. To be fair, there was never a $600 hammer. The hammer was part of a much larger purchase. The news outlet divided the total budget by the number of items. But of course, the items varied in cost. There were hammers but also circuit boards that costs thousands of dollars. This story shows why it's important to establish credible cost estimates and challenges you may face costing properly. Analysts call it a cost estimate because it's never 100% precise. But your responsibility is to be close and be credible. Here are ways to establish credibility for your cost estimate. First, and it's worth repeating, you're only estimating an accurate cost, not actually coming up with an exact result. But naturally. there's a correlation between the cost to develop the estimate and the accuracy of the estimate itself. The more precise you make…
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