Parametric estimating methods are used in price analysis to:

• A. Compare prices received
• B. Use published price lists
• C. Rely on catalog price
• D. Use estimation models to check reasonableness

Answer: (D)

Parametric estimating methods in price analysis use a mathematical relationship between cost and a few measurable cost drivers to forecast what a price should be. In practice, you build a model from historical data—such as cost per unit, per weight, or per labor hour—and apply it to the item being priced to produce an estimated price. The proposed price is then evaluated against this model to see if it falls within a reasonable range. This helps determine reasonableness, especially when there isn’t enough apples-to-apples data for a straightforward comparison or for large quantities. While other price analysis techniques involve directly comparing prices received or using published price lists or catalog prices, parametric estimating provides a modeled check on whether the price is fair.