Research and Development Cost Estimation

Four companies engaged in research and development were interviewed relative to their method of cost prediction. Company A, engaged in military equipment development, uses a complex operating organization to make estimates. Company B, engaged in commercial development, uses a summary unit cost, i.e., number or predicted man years multiplied by a given number of dollars. Company C, commercial research and development, estimates on the basis of individual projects but holds department managers accountable only for total department costs. Company D, government research and development, uses the future operating structure as does Company A, but seems to use a less complex structure. A further investigation into the use of Summary unit costs is recommended.