7 - Cost Management

Question 1

Actual cost

Answer 1

Amount monies spent on the project to date

Question 2

Analogous estimating

Answer 2

Based on historical.

aka top down

Least reliable

Question 3

Bottom-up estimating

Answer 3

Starts from zero; accounts for each component of hte WBS, arrives at a sum.,

Uses project team and is most accurate.

Question 4

Budget estimate

Answer 4

Broad estimate, used early in planning processes (and also top-down estimating).

Range: -10% to +25%.

Question 5

Commercial database

Answer 5

Uses database to create cost estimate.

Question 6

Contingency reserve

Answer 6

Contingency allowance to account for overruns in cost.

For known risk events.

Question 7

Cost aggregation

Answer 7

Costs for WBS work package aggregated to control account. Control accounts aggregated to top (project cost)

Question 8

Cost baseline

Answer 8

Time-lapse exposure of when project monies are to be spent in relation to cumulative values of the work completed in the project.

Question 9

Cost budgeting

Answer 9

The cost aggregation of each activity/work packages i nWBS. Applies costs over time.

Question 10

Cost change control system

Answer 10

Examines changes associated with scope changes, cost of materials, and cost of other resources and the impacted change on pverall project cost

Question 11

Cost management plan

Answer 11

Subsidiary PM plan - dictates how cost variances will be managed.

Question 12

Cost of poor quality

Answer 12

Money spent to recover from not adhering to the expected level of quality.

e.g. defect work.

aka cost of nonconfoirmance to quality

Question 13

Cost of quality

Answer 13

Money spent to attain expected level of quality within project.

e.g. safety precautions

Question 14

Cost performance index (CPI)

Answer 14

Part of earned value management suite

Shows overall cost efficiency on the project.

CPI = EV/AC

Question 15

Cost Variance (CV)

Answer 15

Earned value management

Difference between earned value and actual cost

CV = EV-AC

Question 16

Definitive Estimate

Answer 16

Most accurate type of estimate.

Used in late planning and associated with bottom up.

Need a WBS.

-5% to +10%

Question 17

Direct costs

Answer 17

Costs applied directly to the project and not shared.

Question 18

Earned Value (EV)

Answer 18

Earned value management

What the project is worth

EV = %complete x BAC

Question 19

Estimate at Completion (EAC)

Answer 19

EVM

Forecasted project costs based on current performance

Standard:
EAC = BAC/CPI

Others as well, but not as common.

Question 20

Estimate to completion (ETC)

Answer 20

EVM

Predict how much more the project will cost.

ETC = EAC-AC

Question 21

Fixed costs

Answer 21

Costs remain constant through life of project

Question 22

Funding limit reconciliation

Answer 22

Organizaitons approach to managing cash flow against project deliverables based on a schedule, milestone accomplished, or data constraints.

Question 23

Indirect costs

Answer 23

Costs representative of more that one project (e.g. PMIS software licence)

Question 24

Known unknown

Answer 24

Event that will likely happen within the project, but when/to what degree is unknown.

Usually risk-related (e..g a delay).

Question 25

Learning curve

Answer 25

cost per unit decreases as more units are completed. Workers learn how to be more efficient.

Question 26

Oligopoly

Answer 26

Market condition where market is so tight that the actions of one vendor affects the actions of all others. (e..g gas pricing)

Question 27

Opportunity cost

Answer 27

Total cost of an opportunity that is refused to realize an opposing opportunity.

Question 28

Parametric estimating

Answer 28

Using a paramater and extrapolated

Question 29

Planned Value (PV)

Answer 29

What the project should be worth.

PV = percent of BAC where project should be at.

Question 30

Project Variance

Answer 30

The final variance, discovered at the end.

VAR = BAC-AC

Question 31

Regression analysis

Answer 31

Statistical approach to prediicting what future values may be, based on historical values.

aka analytical technique where a series of input variables are examined in relation to their corresponding output results in order to develop a mathematical or statistical relationship.

Creates quantitative predictions based on variables within one value to predict variables in another.

Question 32

Reserve analysis

Answer 32

Cost reserves are for unknown unknowns.

The management reserve ids not part of the project cost baseline, but is included as part of the project budget.

Question 33

Rough order of magnitude (ROM)

Answer 33

Used during initiating processes and in top-down.

-25% to +75%

Question 34

Schedule performance index (SPI)

Answer 34

EVM

Shows overall schedule adherence

SPI = EV/PV

Greater than 1 = ahead of schedule. Less = behind.

Question 35

Schedule variance (SV)

Answer 35

EVM

Difference between earned value and planned value

SV = EV-PV

\+ = ahead of schedule
- = behind

Question 36

Single source

Answer 36

Though many vendors can provide what your project needs, you prefer to work with a single one.

Question 37

Sole source

Answer 37

One vendor can provide what your project needs to purchase.

Question 38

Sunk cost

Answer 38

Monies spent to date.

Question 39

To complete Performance Index (TCPI)

Answer 39

Used to predict likelihood of reaching goals (BAC or EAC) based on current performance.

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

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

Question 40

Variable costs

Answer 40

Changes as prokject goes on

Question 41

Variance

Answer 41

Difference between expected and actual

Question 42

Variance at Completion (VAC)

Answer 42

EVM

Projection of being over or under budget based on current performance

VAC = BAC-EAC

\+ = under budget
- = over budget