# AAICC -- Statistics in Contract Pricing _ Exam 2

## 21 terms · Statistics in Contract Pricing

Arithmetic Mean
Median
Mode

### What is Central Tendency?

The central value around which data observations tend to cluster

### 4 Useful Measures of Dispersion

1. Range: (high - low value)
Lower dispersion (smaller range) = more confidence
2. Variance (S2): AVG of sq. deviations between each observation & mean
3. Standard Deviation (S): sq. root of Variance
4. Coefficient of Variation: use when 2 means (i.e.- 2 samples/ data groups); measure of relative dispersion= S/mean

### Stratified Sampling:- when used; how to use

used in pricing large bills of material
- Generally evaluate one group (high \$ value) 100% and random sample one or more of the remaining groups. Apply decrement factor based on evaluation
- Most common sampling for cost/price analysis
- Identify items for 100% analysis
- Summarize the recommended cost for the 100% analysis category
- Group the remaining items in a separate category for analysis
- Determine the number of items to be sampled
- Randomly select items for analysis
- Develop a "decrement factor" for random sampled items.
- Apply decrement factor to the total proposed cost of all items in the category.
- Establish pre negotiation position on the cost category

### Cost Estimating Relationship (CER)

Predicts a particular cost or price by using an established relationship with an independent variable. It's a form of parametric estimate

- G&A

### Indirect Cost Allocation Base

- Direct Labor Hours
- Direct Labor \$
- \$ / Machine Hour

### What are the 4 useful measures of dispersion?

- RANGE
- VARIANCE - MOST POPULAR
- STANDARD DEVIATION - MOST POPULAR
- COEFFICIENT OF VARIATION

### What are the 3 classifications of direct labor?

- POSITION DESCRIPTION
- CLASS OF POSITIONS
- POSITION CLASSIFICATION PLAN

### What are the 3 major types of direct labor?

- ENGINEERING -- Design, manufacturing, reliability & maintainability, quality assurance, and sustaining

- MANUFACTURING -- fabrication, assembly, and quality control

- SERVICES -- Professional services, clerical, and technical services

### When evaluating direct labor, what do you look at?

LABOR HOURS & RATES

TRUE

### What are the three bases used for estimating unit prices?

CURRENT QUOTES
HISTORICAL QUOTES
INVENTORY PRICING

TRUE

### When is profit/fee analysis required?

WHEN COST OR PRICING DATA ARE USED TO DEVELOP A POSITION ON CONTRACT PRICE, PROFIT/FEE ANALYSIS IS REQUIRED.

WHEN INFORMATION OTHER THAN COST OR PRICING DATA ARE USED TO DEVELOP A POSITION ON CONTRACT PRICE, PROFIT/FEE ANALYSIS MAY BE REQUIRED

### What are the 3 goals of FAR profit / fee policy?

1. STIMULATE EFFICIENT CONTRACTOR PERFORMANCE

2. ATTRACT THE BEST CAPABILITIES OF QUALIFIED LARGE AND SMALL BUSINESS CONCERNS TO GOVERNMENT CONTRACTS

3. MAINTAIN A VIABLE INDUSTRIAL BASE TO MEET PUBLIC NEEDS

### What are the 7 factors to consider in profit/fee analysis?

1. CONTRACTOR EFFORT
2. COST RISK
3. SOCIOECONOMIC PROGRAMS
4. CAPITAL INVESTMENT
5. COST CONTROL/PAST PERFORMANCE
6. INDEPENDENT DEVELOPMENT
7. ADDITIONAL FACTORS PRESCRIBED BY AGENCY

### What is the Range (R)?

Difference between the highest (H) and the lowest (L) observed values.
Range = High Value-Low Value
The higher the range, the greater the dispersion, and less confidence you have in that number.

### What is Variance S2?

The average of the squared deviations between each observation and the mean.

### What is Simple Regression?

A single independent variable (X) is used to predict a single dependent variable (Y)
Dependent variable is usually price or cost.
Independent variable is a measure related to the item / service being acquired.
Y = A+BX

### How is the Indirect Cost Rate Calculated

Indirect Cost Rate = Indirect Cost Pool / Indirect Cost Allocation Base