There are very many methods that can be used in cost estimation, such method may be relevant depending on the projects. Some methods may favors given projects while others may not be encouraged to be used in particular projects. The best cost estimating method may also depend on the available data or any resources such as the financial resource. The methods are:
Scatter graph is method of estimating fixed and variable costs. It provides a visual picture of the total costs at different activity levels. Its demerit is that hard to visualize the cost equation line through the data points, especially when the data is differs. It also requires multiple data points and requires five
It’s a statistical method used to calculate both the fixed and variable data. Its advantages are it is very accurate. The disadvantage is that it requires a lot of calculation which may be very tiresome.
It uses the highest and lowest activity levels of a data to estimate the portion of a mixed cost that is variable and the portion that is fixed. It disadvantage is that it may be misleading if the activity levels are not representative of the normal activity. For example when there are many outliers. The advantage is that it is very easy and do not require a lot of calculations.
Various costs estimating method requires various resource, Government as a bigger organization is in a position to require enough resources. For example Government may easily require finance and the required data. The Government contract requires a lot of accountability due to the public interest therefore the best and accurate cost estimation method need to be considered.