12 - Project Cost Management Terminology Flashcards
Activity Cost Estimate
The projected cost of completing an activity.
Actual Cost (AC)
The total cost accrued for an activity over a designated time period; also known as the actual cost of work performed (ACWP).
Basis of Estimates
Supporting details associated with an estimate, typically schedule or cost, that may include assumptions, constraints, level of detail, ranges, and confidence levels.
Budget
The total estimate for the project, or any activity, that has been approved.
Budget at Completion (BAC)
Budgetary Estimate
An estimate used to put money into a company’s (or project’s) budget.
Chart of Accounts
A structure used to monitor project cost that usually aligns with a company’s accounting system and WBS of the project or program.
Code of Accounts
The numbering system used to distinguish constituents of the WBS.
Control Account
A specific point in the work breakdown structure (WBS) where the project scope, budget, actual cost, and schedule are combined and then compared to earned value in order to establish performance metrics.
Control Costs
The process of observing project status in order to revise project costs and administer cost baseline revisions.
Cost Aggregation
Adding together the work package cost estimates for high-level WBS components, including control accounts, for the purpose of establishing the value of the total project or the control account work.
Cost Baseline
The authorized project budget version, exclusive of management reserves, that requires a formal control process to effect changes and is used as the basis of comparison to actual costs.
Cost Management Plan
The document, part of the project or program management plan, used to describe the framing, forming, observation, and control of project costs.
Cost of Quality
The total cost of achieving or failing to achieve desired quality: specifically the costs of achievement are those associated with planning, controlling, and assuring quality and the costs of failure are those associated with reworking, warranty, waste, and negative reputation.
Cost Performance Index (CPI)
The ratio indicating the cost efficiency of resources, calculated by dividing earned value (EV) by actual cost (AC): a CPI of 1.0 indicates the project is proceeding as planned financially; a CPI greater than 1.0 more indicates the project is proceeding better than planned financially; and a CPI less than 1.0 indicates the project is not proceeding as well as planned financially.
Cost Variance (CV)
The deficit or surplus of the budget at any specific point in time, calculated by subtracting the actual cost (AC) from the earned value (EV): a value of 0 indicates the project is on budget, a value greater than 0 indicates the project is under budget, and a value less than 0 indicates the project is over budget.
Cost-benefit Analysis
A financial analysis method that compares the potential revenue derived from an opportunity to the cost of that opportunity.
Definitive Estimate
A cost estimate that provides an accurate estimate of the project cost; the final cost estimate used before implementation; typically the estimate has a tolerance range of -5% to +10%.
Determine Budget
The process of totaling the evaluations of individual activities to arrive at an authorized cost baseline.
Direct Cost
Cost that is directly applicable to the project; examples include the cost of a test computer for software being created by the project, the cost of IC chips, or the costs of project labor.
Earned Value (EV)
The value of the work that has been completed as of a specific point in time calculated by multiplying the completion percent of activity by its planned value, then adding the results; also known as the budgeted cost of work performed (BCWP).
Earned Value Management
A technique, effected by considering actual cost (AC), schedule (PV), and what has been accomplished (EV), that is used to determine project progress and performance.
Earned Value Technique (EVT)
The technique associated with measuring the amount of completion of a work breakdown structure component, control account or project.
Estimate at Completion (EAC)
The expected cost of performing all of the work in the project calculated by adding the actual cost (AC) to the estimate to complete (ETC).
Estimate Costs
The process of approximating the monetary resources required to complete the work of the project.
Estimate to Complete (ETC)
The expected monetary resources required to complete the remaining work of the project; calculated by subtracting actual cost (AC) from the estimate at completion (EAC).
Fixed Formula Method
A progress reporting approach, typically applied when an activity is two reporting periods or less in duration, that assigns a percentage to an activity at its start and the remaining percentage at its completion so that the percentage at completion equals 100%; for example, if an activity is assigned 30% at its start, 70% will be added at its completion resulting in a completion percentage of 100%.
Funding Limit Reconciliation
The process of comparing planned project expenses to any limitations or constraints in project funding.
Indirect Cost
Cost that is not directly accrued on the project (for example, electricity, taxes, rent).
Internal Rate of Return (IRR)
A project comparison value; represents the discounted rate that zeros out the net present value (NPV).
Learning Curve Theory
A theory which states that the more of something that is produced, the lower the unit cost of it becomes due to an improvement in efficiency.
Life Cycle Costing
Consideration of not just project cost, but total ownership (operations and support) cost of the item created by the project.
Net Present Value (NPV)
A value used in capital budgeting, in which the present value of cash inflow is subtracted from the present value of cash outflows; compares the value of a dollar today versus the value of that same dollar in the future, after taking inflation and return into account.
Opportunity Cost
The amount associated with bypassing one opportunity in favor of another; as an example, if the pursuit of project B with a value of $75K is elected over the pursuit of project A with a value of $50K, $50k value of project A will not be realized.
Parametric Modeling
Application of a mathematical model used to estimate project components (schedule, cost, scope) by having other variables entered into the application.
Performance Measurement Baseline (PMB)
The comparison of project execution to the approved and integrated scope, schedule, and budget (exclusive of management reserves, but inclusive of contingency reserves) for the purpose of gauging and administering performance.
Plan Cost Management
The process of establishing policies, procedures, and documentation for the planning, execution, and monitoring and controlling of cost-related project items.
Planned Value (PV)
The total value of the work scheduled as of a certain point in time; also known as the budgeted cost of work scheduled (BCWS).
Profit
Money made after expenses have been subtracted from revenue.
Profit Margin
Ratio between revenues and profit on a project, product, or initiative.
Project Cost Management
The processes required to estimate, budget, disburse, administer, and regulate costs in order to complete the project within the approved budget.
Project Funding Requirements
The forecast of project costs based on the cost baseline for the total project plus any anticipated liabilities; the forecast can be applied to specific time periods rather than to the project as a whole.
Rough Order of Magnitude (ROM) Estimate
A cost estimate, performed early in the project, of the completion cost of the project; the tolerance range is -25% to +75%.
S Curve
Graphic representation of costs, work, and other quantities over time so that the planned value, earned value, and actual cost of the work can be seen.
Schedule Performance Index (SPI)
A measure of project schedule efficiency calculated by dividing the earned value (EV) by the planned value (PV): a value of 1.0 indicates the work is being performed as expected, a value greater than 1.0 means the work is being performed ahead of schedule, and a value of less than 1.0 means the work is being performed behind schedule.
Schedule Variance (SV)
A determination of schedule performance calculated by subtracting the planned value (PV) from the earned value (EV): if the result is zero, the project is performing as expected; if the result is positive, the project is ahead of schedule; if the result is negative, the project is behind schedule.
Sunk Cost
Money that has already been spent on a project; should not be considered when selecting or evaluating a project.
Tangible Cost/ Benefit
Easily measurable cost or benefit of a project; measured in dollars.
To-complete Performance Index (TCPI)
The ratio that represents the cost performance required to complete the work of the project given the remaining resources; calculated by dividing the remaining project work by the remaining budget (BAC - EV / BAC - AC).
Variance At Completion (VAC)
The projected amount the project will be over or under budget based on the difference between the budget at completion (BAC) and the estimate at completion (EAC).
Weighted Milestone Method
An approach to the earned value method in which an activity with a duration exceeding two reporting periods is broken down into smaller activities with durations limited to two reporting periods or less.
