The SuperFlyer Corporation is developing a revolutionary flying disc. The new toy can fly straight over a great distance, which is exciting by itself. However, this disc will also return to the owner in response to their voice! Because this is an advance over anything that this company has done before, estimating the amount and cost of the hi-tech materials are difficult. The project manager recommends using a range estimating process to develop an estimate. The values below are submitted by the project team.
Current estimates for cost of material are as follows:
Optimistic cost of smart resin: $6.00 per lb
Most likely cost of smart resin: $8.00 per lb
Pessimistic cost of smart resin: $8.50 per lb
Current estimates for total material requirements are as follows:
Optimistic quantity: 21 lb/ 100 units
Most likely quantity: 24 lb/ 100 units
Pessimistic quantity: 30 lb/ 100 units
(a) What is the expected price of the material per pound?
(b) What is the expected amount of material needed for 100 units?
(c) What is the expected cost for 100 units using the Simple Method?
Student Answer: a) Expected price of the material per pound: 6+4(8)+8.5/6= $7.75 b) The expected amount of material needed for 100 units: 21+4(24)+30/6= 24.5 lb/ 100 units c) The expected cost for 100 units using the simple method: $7.75(100)= $775
2. Question : (TCO A) Single-project budgeting must fit into the overall budgeting process of the organization and the company as a whole. As a project manager for one of your company's projects, you have been asked to provide a brief description of the top-down approach to the budgeting process.
Explain the three basic steps in the top-down budgeting approach by identifying the organizational level (Upper Management, Functional Management, and Project Management) and type of budget prepared at each step. For each type of budget, explain why it is used at its level.... [continues]
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