The Actual Cost approach uses which type of data?

The Actual Cost approach uses which type of data?

• A. Relies on vendor quotes
• B. Based on rough estimates
• C. Uses internal expert opinion
• D. Uses previous procurement data of the same item

Answer: (D)

Actual cost relies on data from prior purchases of the same item. It uses the costs that were actually paid in past procurements, including all components such as freight, discounts, and any incidental fees, and then can be adjusted for inflation, quantity differences, or minor specification changes to estimate current costs. This approach is most reliable when there is a stable item with a solid price history, because it reflects real-world pricing rather than guesses or forward-looking quotes. Vendor quotes are forward-looking prices for a new acquisition. Rough estimates are ballpark guesses without actual purchase history. Internal expert opinion is judgment based on experience rather than actual past costs. Using previous procurement data of the same item provides the most concrete, realized basis for cost estimation.

Actual cost relies on data from prior purchases of the same item. It uses the costs that were actually paid in past procurements, including all components such as freight, discounts, and any incidental fees, and then can be adjusted for inflation, quantity differences, or minor specification changes to estimate current costs. This approach is most reliable when there is a stable item with a solid price history, because it reflects real-world pricing rather than guesses or forward-looking quotes.

Vendor quotes are forward-looking prices for a new acquisition. Rough estimates are ballpark guesses without actual purchase history. Internal expert opinion is judgment based on experience rather than actual past costs. Using previous procurement data of the same item provides the most concrete, realized basis for cost estimation.