Assumptions and method
This example assumes lower is better. Establish causality, persistence and real cash release separately.
Test a scenario
Use the result in a decision
Define the intended outcome and who will measure it.
This example assumes lower is better. Establish causality, persistence and real cash release separately.
Set a baseline and change one assumption to compare outcomes.
A worked example
Follow the fixed teaching example
- Reduction = 12 − 8 = 4; target achievement = 4/5 × 100 = 80%.
- Illustrative period value = 4 × 0.5 × 2,000 = 4,000. Check that the unit reduction actually releases this value.
These illustrative inputs describe a project scenario, not a published benchmark. All monetary inputs use the same currency and price basis.
- Baseline units per transaction
- 12
- Observed units per transaction
- 8
- Target reduction per transaction
- 5
- Value per unit saved
- 0.5
- Transactions per period
- 2000
- Reduction from baseline
- 4
- Target achieved
- 80 %
- Illustrative period value
- 4,000
Interpret the output only within the assumptions above. Changing the inputs changes the result; it does not validate the inputs.
Source & credit
Standard estimating practice; the cited guide documents use rather than claiming invention.
GAO: Cost Estimating and Assessment Guide
This is independently written code and explanation of the underlying method. The linked publication, its diagrams and its trademarks remain its owner’s material; no permission to reuse them is implied.