In cost estimation-the total cost of a project

Reference no: EM13312963

In cost estimation, the total cost of a project is the sum of component task costs. each of these costs is a random variable with a probability distribution. It is customary to obtain information about the total cost distribution by adding together characteristics of the individual component cost distributions- this is called the roll-up procedure. For example E(X1+...+Xn)= E(X1) + ... + E(Xn), so the roll up procedure is valid for mean cost. Suppose that there are 2 component tasks and X1 and X2 are independent, normally distributed variables. Is the roll up procedure valid for the 75th percentile? That is, is the 75th percentile of the distribution of X1 + X2 the same as the sum of the 75th percentiles of the two individual distributions? If not, what is the relationship between the percentile of the sum and the sum of percentiles? For what percentiles is the roll up procedure valid in this case?

Reference no: EM13312963

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