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My PMP prep > 6. Cost Management > Flashcards

6. Cost Management Flashcards

1
Q

What is the process of cost management?

A

Plan Cost Management

Estimate Costs

Determine Budget

Control Costs

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2
Q

What is the output of the Plan Cost Management process?

A

Cost management plan

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3
Q

What are the key inputs to the Estimate Costs Process?

A

“Cost management plan

Quality management plan

Scope baseline

Lessons learned register

Project schedule

Resource requirements

Risk register

Enterprise environmental factors

Organizational process assets

Project management costs

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4
Q

What are the key outputs of the Estimate Costs process?

A

Costs estimates

Basis of estimates

Updates to project documents

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5
Q

What are the key outputs of the Determine Budget process?

A

Cost baseline

Project funding requirements

Updates to project documents

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6
Q

What are the key outputs of the Control Costs process?

A

Work performance information

Cost forecasts

Change requests

Updates to project management plan and project documents

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7
Q

What does life cycle costing mean?

A

Considering costs over the entire life of the product, not just the cost of the project to create the product

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8
Q

What is value analysis?

A

Finding a less costly way of doing essentially the same work (also known as value engineering)

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9
Q

What three knowledge areas use the concept of cost risk?

A

Cost

Procurement

Risk

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10
Q

What calculations can be used to determine whether the project will be paid for with the organization’s existing funds or will be funded through equity or debt?

A

Net present value (NPV)

Return on investment (ROI)

Payback period

Internal rate of return (IRR)

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11
Q

What is discounted cash flow?

A

A technique used in project selection to estimate the attractiveness of an investment by preceding how much money will be received in the future and discounting it to its current value

In cost management planning, it is used to evaluate the potential revenue to be earned from specific project work

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12
Q

What are the control thresholds? When are they determined?

A

The amount of variation allowed before you need to take action

Determined while creating the cost management plan

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13
Q

How do variable costs differ from fixed costs?

A

Variable costs change with the amount of production or amount of production or amount of work done on the project

Fixed costs do not change as production changes

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14
Q

What is a direct cost?

What is an indirect cost?

A

Direct cost: A cost that is directly attributable to the work on the project

Indirect cost: Overhead costs or costs incurred for the benefit of more than one project

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15
Q

What are the advantages of analogous estimating?

A

Quick

Activities do not need to be identified

Less costly to create

Project manager will have data to evaluate high-level project feasibility

Overall project costs will be capped

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16
Q

What are the advantages of bottom-up estimating?

A

More accurate

Gains buy-in from the team

Based on a detailed analysis of the project and the deliverables

Provides a basis for monitoring and controlling, performance measurement, and management

17
Q

What is reserve analysis?

A

Reserve analysis involves identifying which activities on the project have significant risk and determining how much time and money to set aside to account for those risks in case they occur

18
Q

What is the difference between a contingency reserve and a management reserve?

A

Contingency reserves are used for known risks, which are specifically identified risks

Management reserves are used to accommodate unknown or unidentified risks

19
Q

What is cost of quality?

A

The cost of work added to the project to accommodate quality efforts

20
Q

Name the typical range for the following:

  • rough order of magnitude (ROM) estimate
  • budget estimate
  • definitive estimate
A

• ROM estimate:
-25 to +75 percent from actual

• Budget estimate:
-10 percent to +25 percent from actual

• Definitive estimate:
+/-10 percent from actual

21
Q

What is the difference between a cost budget and a cost baseline?

A

The cost budget adds management reserves to the cost baseline

22
Q

How can progress reporting help the project manager?

A

It can help the control the schedule and costs

It can help the project manager asses whether the project is on track through earned value analysis

23
Q

What is earned value analysis, and how it is used?

A

It is used in performance reviews to measure project performance against the scope, schedule , and cost baselines

Using the work performance information gathered through earned value analysis, a project manager can create reports, including cost forecasts, and other communications related to the project’s progress; it may also result in change requests

24
Q

What combined baselines are called the performance measurement baseline?

A

Scope, schedule, and cost baselines

25
Q

What is the difference between planned value and earned value?

A

Planned value is the estimated value of the work planned, as for today

Earned value is the estimated value of the work actually accomplished, as of today

26
Q

What is actual cost?

What is budget at completion?

A

The actual cost incurred for the work accomplished, as of today

The project’s planned budget; indicates what the end cost of the project would be if everything went according to plan

27
Q

What is the formula for cost variance?

A

EV - AC = CV

28
Q

What is the formula for schedule variance?

A

EV - PV = SV

29
Q

What is the formula for cost performance index?

A

EV/AC = CPI

30
Q

What is the formula for schedule performance index?

A

EV/PV = SPI

31
Q

What are the formulas for estimate at completion?

A

AC + Bottom-up ETC = EAC

BAC/CPI^C = EAC

AC + (BAC - EV) = EAC

AC + (BAC - EV) / (CPI^C * SPI^C) = EAC

32
Q

What is the formula for to-complete performance index?

A

(BAC - EV) / (BAC - AC) = TCPI

33
Q

What is the formula for estimate to complete?

A

EAC - AC = ETC

34
Q

What is the formula for variance at completion?

A

BAC - EAC = VAC

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