Cost Analysis and Estimation

Fans of the Chevrolet Camaro and Pontiac Firebird mourned when General Motors (GM) announced that these classic muscle cars were headed for that big parking lot in the sky at the end of the 2001 model year. GM management said the Camaro and Firebird had become victims of America's obsession with sport utility vehicles and light trucks. Management would have us believe that the kids who used to crave inexpensive but fun-to-drive muscle cars were now driving $35,000 Ford Explorers.

The truth is that poor product quality, outdated design, lackluster marketing, and tough competition from foreign rivals killed the Camaro and Firebird. It's simply not true that young people, and the young at heart, no longer want cars that are fast, loud, and cheap. To convince yourself of this, simply go downtown in almost any city or suburb in America on Friday or Saturday night. It won't be long before you get nearly blown off the sidewalk by some kid slouched behind the wheel of a "low-rider" with windows vibrating to the thump of ultra-amplified bass. In the 1970s or 1980s, that kid was in a Camaro or Firebird. Today, they probably drive a Honda Civic or Acura Integra. Both are relatively cheap, stylish, and easy to customize. If you're not into customizing, try a Toyota Celica GT-S 2133 Liftback 2D (6-Spd.). It's more than a stylish, dependable bargain priced at about $23,000. It's fun to drive. A high-quality car is more than neat looking and dependable; it's a blast to get behind the wheel of a high-quality car.

Cost estimation and control is part of the continual process of making products that exceed customer expectations. Quick fixes don't work. This chapter shows how making things faster, cheaper, and better requires a fundamental appreciation of cost concepts.1

1 Karen Lundegaard, "Big Three Trail Their Rivals in Consumer Reports Survey," The Wall Street Journal Online, March 13, 2002 (http://online.wsj.com).

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