You are a project manager for the development of motorolas

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Reference no: EM13465194

Contingency Allowance:

You are a project manager for the development of Motorola's new 4G, HD, Touch Screen Cell Phone which is supposed to take the cell phone industry by storm. Listed below are the initial cost estimates for the materials and labor for one of the phones:

ITEM	COST ESTIMATE	TYPE OF ESTIMATE
Case	$20.00	Order of Magnitude
Handset	$12.00	Definitive
Labor	$2.00	Definitive
Speaker	$2.50	Budget
Mouthpiece	$5.50	Budget
Antenna	$1.70	Definitive
Keypad	$3.00	Order of Magnitude
Circuit boards (handset)	$6.50	Budget
Circuit boards (base unit)	$8.50	Definitive
Battery	$1.20	Order of Magnitude
Charger	$16.00	Order of Magnitude
Total cost	$78.90	NA

The estimating department currently defines estimate accuracy as follows:

Order of Magnitude	-25%, +85%
Budget	-10%, +25%
Definitive	-5%, +10%

(a) What contingency cost budget do you recommend for the product?

(b) The target retail price for the new telephone is $165.00 per unit. The markup demanded by retailers is 50%. Based on cost factors, write a brief rationale for acceptance or rejection of the project, including any recommendations you have regarding the cost estimates.

Reference no: EM13465194

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