1
Event 4 – Project Cost Estimation with Risk
1.
A project to design and install an assembly line has the WBS below. We are uncertain about
the WP costs of the project.
The managers for the various tasks have estimated the mean and
standard deviations of the work package costs. For this problem we use the normal
distribution for the cost models. Throughout this event assume the WP costs are independent.
Description
Mean
Std. dev.
1 Process design
14
5
2 Capacity Planning
23
2
3 Material handling
11
2
4 Facilities planning
17
2
5 Purchasing
107
10
6 Development of training
18
5
7 Actual training
51
4
8 Installation and Integration
32
10
9 Management of Project
35
3
For this problem you may use Excel, but not the
Estimate
or
Random Variables
addins.
What is the expected (or mean) value of the project cost?
308
What is the standard deviation of the project cost?
16.94
Use the 60
th
percentile for point estimates for each WP. What is the point
estimate of the project cost?
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 Spring '10
 BARD
 Normal Distribution, Standard Deviation, Probability theory

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