13. Cost Management (Knowledge Area 4) Flashcards
three-point estimating
uses the PERT formula and may or may not be accurate
analogous estimating
a quick estimate that is based on previous projects
management reserves
cost baseline, plus the management reserves.
CPI
cost performance index = measurement of the cost efficiency of the budgeted resources
1 = project on budget
<1= project over budget
contingency reserves
part of the cost baseline
basis of the estimates
will document the confidence level of an estimate
cost aggregation
take the work packages and aggregate their individual cost to find the entire project budget
bottom-up estimating
when work packages are broken down and then rolled back up to form an overall cost estimate
can lead to a very precise estimate, although it requires the most amount of work.
management reserves
added to the cost baseline in case the project exceeds its budget
usually added by the company’s management and is not under the manager’s control
cost baseline
cost estimates
include the cost for labor, materials, equipment, services, and facilities
DO NOT include the operational costs of the product, since those costs cover operations and not a project
PV
Planned Value
EV
Earned Value
BAC
Budget at Completion
AC
Actual Cost
CPI
Cost Performance Index
CV
Cost Variance
SV
Shedule Variance
ETC
Estimate to Completion
EAC
Estimate at Completion
Estimate To Completion
(ETC) Forecasting the amount that will be needed to complete the current project based on the current performance
SPI
Schedule Performance Index
VAC
Variance at Completion
Planned Value
(PV) Amount of money worth of work that should have been done on the project
TCPI
To-Complete Performance Index
Planned Value Formula
PV=Planned % Complete x Budget at Completion
Earned Value
Amount of money worth or work you actually did on the project
Earned Value Formula
EV=Actual % Complete x Budget at Completion
Schedule Variance Formula
SV = Earned Value - Planned Value
Estimate At Completion
(EAC) Forecasting the total cost of the project at the end based on the current spending rate of the project.
Schedule Variance
(SV) The difference bn the amount of work we should have done vs. the amount actually done.
positive value = ahead of schedule
negative value = behind schedule
Cost Performance Index Formula
CPI = Earned Value / Actual Cost
Cost Performance Index
The rage of how we are spending to acually earning on the project.
1+ for underbudget
Schedule Performance Index
(SPI) The rate of how we are meeting the project schedule.
1+ for ahead of schedule
Variance At Completion
The difference between the original budget and new forecasted budget.
+ for budgets that may end at or under budget
Cost Variance
The difference between the work done and money spent.
positive value = under budget
negative value = over budget
Cost Variance Formula
CV=Earned Value - Actual Cost
Actual Cost
Amount of money you already spent on the project.
To-Complete Performance Index Formula
TCPI = (Budget At Completion - Earned Value) / (Budget At Completion - Actual Cost)
S-curve graph
a time phase view of the cost baseline; typically shows the budget versus the actual spend on the project
Schedule Performance Index Formula
SPI = Expected Value / Planned Value
ES, EF, LS, LF
early start, early finish, late start, late finish
Estimate To Completion Formula
ETC = Estimate At Completion - Actual Cost
Estimate At Completion Formula
EAC = Budget at Completeion / Cost Performance Index
To-Complete Performance Index
(TCPI) The performance that needs to be met to finish the project within the budget
In the process of control costs, the project manager compares the project management plan with what other information?
work performance data
When developing the cost management plan, what tool or technique includes reviewing the different funding options that can be used to fund the project?
data analysis > includes alternative analysis > includes reviewing strategic funding options
What is the general range of a definitive estimate?
-5% to +10%
While working on a multinational project, the project manager has decided to represent the project budget in American dollars, even though the project will span nine different countries. This will make the budget uniform and easier for the stakeholders to understand.
Where will the project manager document the units of measurement for the budget?
cost management plan
=can establish the units of measurement which would include the currency format
The budget manager has completed the earned value analysis for the project. He has concluded that the CPI of the project is .9.
What is the budget status?
Over budgete by 10%
The cost performance index (CPI) is a measurement of the cost efficiency of the budgeted resources.
1 = project on budget. A number below one illustrates the project being over budget. At .9, the project is 10% over budget.
Early in the project’s planning phase, the project team determined that the cost to install the server would be $15,000. This is a high-level estimate, and the team thinks it may cost up to $10,000 more.
What kind of estimate is this?
rough order of magnitude estimate
= has a range of -25% to +75%
The project manager and the project team determined that the budget for the project will be $60,000. That includes the cost for all the activities and all uncertainties that may have taken place during the project. The project cost baseline is $60,000. The sponsor has determined that if there is a need for additional funds, he will add an additional $5,000.
What do the additional $5,000 represents?
management reserves
The project manager has worked with an expert project team to estimate the project’s cost. The project manager is very confident that the project will end at that budget.
Where should the project manager document his or her confidence level of the cost estimate?
basis of the estimates
The project manager has completed the process of determining budget. He has created the cost baseline, which will be added to the project management plan. The project manager is also aware of the project budget.
What is the difference between the project budget and cost baseline?
cost baseline = cost of all activities, plus the contingency reserves
management reserves = cost baseline, plus the management reserves.
The project manager is currently evaluating how well the project is meeting the project budget.
What earned value formula will be needed to determine if a project is on or over budget?
AC
To determine if a project is on or over budget, you will need to calculate the CV or CPI, both of which use the AC value.
While developing complex software, the project manager decided to bill the company by how many lines of codes it will take to write the software.
What type of estimate best describes this scenario?
parametric estimating = uses mathematical models based on historical records from other projects
utilizes the statistical relationship that exists between a series of historical data and a particular delineated list of other variables
The project manager has calculated the EV of the project to be $14,000 and the PV to be $16,000. The BAC is currently at $22,000.
Describe this project?
Project is behind schedule.
If you are to calculate this project’s SV, you would have gotten a negative number. To calculate the SV, subtract PV from EV, which is $14,000-$16,000 = -$2,000. This project is behind schedule by $2,000 worth of work.
