In its 2007 Cost Risk and Uncertainty Analysis Handbook, the U.S. Air Force describes in great detail its methodology for estimating the total cost of a given system. This methodology is applied to a potential (but fictitious) missile system.
Here, we have a series of 3 example models which use @RISK to build increasingly sophisticated models according to the guildelines of the handbook.
Air Force Missile Cost 0 – Deterministic Model
The handbook stresses the importance of first developing a deterministic model, based on point estimates.
Air Force Missile Cost 1 – Basic @RISK Model
This Basic @RISK Model builds upon the previous deterministic model by incorporating uncertainty according to the guildelines in the Air Force handbook.
Air Force Missile Cost 2 – Correlated Model
This model builds upon the previous model by incorporating explicit correlations between selected inputs, again according to the guildelines in the Air Force handbook.