Cost Analysis and Estimating for Engineering and Management Chapter Forecasting © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-1 Overview Working with Data Graphing, Statistics Regression / Curve Fitting Confidence / Correlation Time Series Moving Averages, Smoothing Cost Indexes © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-2 Business Forecasting Prediction Price of Material Cost/Amount of Labor Market Demand/Price Term Short Years Medium - Years Long Range > Years © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-3 Graphical Analysis Descriptive Statistics Collect/Organize/Analyze Data Summarize/Present Draw Conclusions/Make Decisions Raw Data Communicates Little Information © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-4 Simplifying Data Price, ($/roll) Obs Rel Freq Cum Freq 12.35–12.75 0.003 0.003 12.75–13.15 0.019 0.022 13.15–13.55 33 0.102 0.124 13.55–13.95 51 0.157 0.281 13.95–14.35 121 0.373 0.654 14.35–14.75 50 0.154 0.808 14.75–15.15 44 0.136 0.944 15.15–15.65 13 0.040 0.984 15.65–16.05 0.016 1.000 324 1.000 © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-5 Graphical Presentation © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-6 Frequency Curves © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-7 Mean Average n x1 x2 xn x n x i i 1 n © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management x n Eq 5.1 Ch 5-8 Median & Mode Median All Data from Lowest to Highest Number in the Middle Mode Data Value(s) that Appear the Most Often © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-9 Standard Deviation Amount of Data Spread Around the Mean n x x i s Eq 5.2 n Variance Is the Square of the Standard Deviation © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-10 Time Series Models Used for Forecasting Fundamentals Consistent Data Collection Types of Behavior Moving Average Smoothing Data Added on Revolving Basis © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-42 Time Series Data Collected at Successive Periods Usually Equally Spaced Is the Underlying Process Constant Variable Trend-Cycle Seasonal Regular © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-43 Typical Time Series Models © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-44 Moving Average Places More Reliance on Recent Data Recent Data Better Predicts Future xt xt xt N 1 Ma N N Eq 5.36 Determines Rate of Response © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-45 Smoothing “Weighted” Moving Average Exponential Smoothing St x xt 1 St x © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Eq 5.38 Ch 5-46 Smoothing Constant Variations in values Drift in data Small, = None Little, = 0.5 None None None Moderate Very small Small Moderate Large Small Moderate Large © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Large, = Ch 5-47 Cost Index Dimensionless Number Represents Change in Cost Over a Period of Time Relative to a “Benchmark” Period What is Costed Remains Constant Used to Forecast © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-48 Using Cost Index Compares Known Cost at Period r Using Current Ic and Reference Ir Indexes Ic C c C r Ir © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Eq 5.39 Ch 5-49 Figuring Cost Indexes Benchmark Cost Used as Denominator Index for Benchmark Period = or 100 Costs for Other Periods Divided by Benchmark Cost © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-50 Rate of Change Differences Between Periods Percent Change Current index, period 106.8 Less previous index, period 102.3 Index point change Divide by previous index Equals © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management +4.5 102.3 +0.044 = + 4.4% Ch 5-51 Change Rate Figuring Average I e r I b Using 1/ n Rate of Change 1 100 Eq 5.40 Rate of Change to Find Index r I e I b 1 100 © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management n Eq 5.41 Ch 5-52 Composite Index Material Laser glass 0* $26,117 $24,027 $22,345 $21,228 Steel tubing 1913 2008 2129 2278 Al extrusion 418 426 439 456 Printed circuits 637 643 656 657 Harness cable 2103 2124 2134 2305 Glass tubing 4317 4187 4103 4185 $35,505 $33,415 $31,806 $31,119 100.0 94.1 89.6 87.6 Total Index, % * Benchmark Period © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-53 Indexes Basis Changes (Qty, Qual, Mix, etc) Technology Creep Kinds of Indexes Material Labor Geographical Index Specific for Time and Location © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-54 Caveats Results Depend on Good Data Cause and Effect Relationship Eliminating Spurious Data Backcast Period Forecast Period Limit Number of Variables Use Judgment Test for “Reasonableness” © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-55 Summary Objective - Forecasting Methods for Working with Data Graphing, Statistics, Regression Data In Time Periods (Time Series) Cost Indexes Applications, Calculations, Caveats © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-56 ... Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-14 Regression Analysis Finds Dependent y for Given x If x Is Time Called Trend Line Used for Forecasting... Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Ch 5-3 Graphical Analysis Descriptive Statistics Collect/Organize/Analyze... Little Information © 2004 Pearson Education, Inc Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ 07458 Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management