DAVION

SYSTEMS

Cost Variances

 

When you enter a direct cost value such as $1000, you may not be sure of the exact amount. That $1000 might be better represented as, for example, 'somewhere between $800 and $1200'.

 

When you deal with defined costs, such as 200 hours of labor, you may have to deal not only with uncertainty in the number of hours but also in the price you pay per hour. That 200 hours might in reality be something like '200 hours +/- 10% at an hourly rate somewhere between $80 and $85'.

 

Mandrel provides the ability to attach variances, i.e. plus-or-minus extensions, to each cost element. Every cost element is actually stored as three separate items:

  • Mid-range cost
  • High-range increment
  • Low-range decrement

In the case of the direct cost example given above, the mid-range cost would be $1000, with high-range and low-range values of +20% and -20% respectively. Mandrel lets you work in either percentages or actual values, so you can also represent the cost as $800/$1000/$1200.

The high and low ranges can be different. You could, for example, insert a cost as $1000 +20% -10%, or $900/$1000/$1200.

 

Unit prices can also have variances attached to them and are represented in a similar fashion.

 

Of course, if you are confident of your cost values, the high-and low-range values can be ignored. If you choose to enter data in base+contingency mode, only the mid-range and high-range values are used, and the low-range value is ignored.

 

When you come to report on overall bottom-line costs the results can be considerably different depending on whether you use mid-range, high-range or low-range values for each cost element, and whether you use mid-, high- or low-range unit prices. You can show bottom-line mid-range costs, worst case costs, and best case costs, all in the same report.