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CAPM® in Depth: Certified Associate in Project Management Study Guide for the CAPM® Exam > 7. Project Cost Management > Flashcards

7. Project Cost Management Flashcards

1
Q

What percentage of the CAPM exam do the objectives covered in this chapter represent?

A

8 percent

This is equivalent to about 11 questions.

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2
Q

What is the intrinsic relationship between scope, schedule, and cost called?

A

Triple constraint

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3
Q

What are the three avenues explored in managing project costs?

A
  • Estimating cost
  • Determining budget
  • Controlling cost
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4
Q

What does project cost management consist of?

A
  • Developing a cost management plan
  • Estimating costs
  • Determining a budget
  • Controlling costs
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5
Q

What is the difference between cost and budget?

A

Cost is the value of inputs used for tasks, while budget is an aggregated cost with a timeline.

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6
Q

What does the Plan Cost Management process generate?

A

A cost management plan

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7
Q

What should be extracted from the project charter for the cost management plan?

A
  • Preapproved financial resources
  • Project requirements influencing cost management
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8
Q

What role do enterprise environmental factors play in cost management?

A

They influence the development of the cost management plan.

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9
Q

What is an example of a cost-related assumption?

A

Counting only direct costs of the project.

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10
Q

What is the purpose of the cost management plan?

A

Guide on how to manage costs, including estimating, budgeting, and controlling costs.

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11
Q

True or False: Cost performance measurement rules may be defined in the cost management plan.

A

True

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12
Q

What is the accuracy level in cost estimation?

A

Approximation errors; e.g., if estimated at $100 with ±20%, the cost could range from $80 to $120.

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13
Q

What is the purpose of the Estimate Costs process?

A

To develop an estimate for the monetary resources needed to complete project work.

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14
Q

Fill in the blank: The scope baseline is constituted by the scope statement, WBS, and _______.

A

WBS dictionary

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15
Q

What documents provide resource information for cost estimates?

A
  • Project Schedule
  • Resource Requirements
  • Quality Management Plan
  • Risk Register
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16
Q

What is one method used to estimate costs?

A
  • Analogous estimating
  • Three-point estimates
  • Bottom-up estimating
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17
Q

What is analogous cost estimation?

A

A technique that evaluates cost-related variables from similar components in previous projects.

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18
Q

What is parametric estimation?

A

A technique that uses parameters and statistical relationships among them to make estimates.

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19
Q

What is a key caution regarding cost planning?

A

Cost is planned very early in the project when the probability of influencing it is at a maximum.

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20
Q

What can the lessons learned register be used for in cost estimating?

A

To record experiences and improve the efficiency of cost estimating.

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21
Q

What are the types of costs that can be included in a cost estimate?

A
  • Direct costs
  • Indirect costs
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22
Q

What is the relationship between the project schedule and cost estimates?

A

The project schedule provides information about required resources and their timing.

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23
Q

What is the output of the Determine Budget process?

A

Cost baseline and project funding requirements.

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24
Q

What is parametric estimation?

A

A technique that uses parameters and statistical relationships among them to make estimates

For example, if the unit cost is known, the cost of the whole package can be calculated.

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25
Define bottom-up estimation.
A technique that estimates the cost of parts of a component and aggregates those costs to calculate the total cost of the whole component.
26
What is a contingency reserve?
An amount of a resource allocated in addition to calculated estimates to reduce risk arising from various sources.
27
True or False: Contingency reserves are part of the project budget.
True
28
What is the purpose of alternative analysis in project management?
To choose one or a few options from many available methods of cost estimation.
29
Fill in the blank: The cost of quality refers to the cost of implementing _______.
[conformance to the planned quality objective]
30
What are three-point estimates?
Estimates that use pessimistic, optimistic, and most-likely scenarios to assess costs.
31
What is the output of the Estimate Costs process?
Activity cost estimates and estimate bases.
32
What elements must be included in the documentation of estimate bases?
* Assumptions made * Constraints affecting estimates * Methods used to develop the estimate * Uncertainty and confidence levels * Risks included in estimates
33
What is cost aggregation?
The technique used to calculate the total cost of a project by summing up the costs of its parts.
34
Differentiate between contingency reserves and management reserves.
* Contingency reserves: Funds for unplanned events from identified risks * Management reserves: Funds for unplanned changes within project scope
35
What is the cost baseline?
The approved budget minus the management reserve.
36
What does controlling costs involve?
Monitoring and controlling cost performance and updates to costs, budget, and cost baseline.
37
List the main aspects of monitoring and controlling project costs.
* Influence factors that create changes to the cost baseline * Monitor work performed against funds expended * Prevent unapproved changes * Act to keep cost overruns within acceptable limits
38
What is variance analysis?
A technique used to assess the magnitude of variation in a project variable from the baseline and determine the need for corrective action.
39
What does the earned value technique (EVT) integrate?
Scope, schedule, and cost performance by comparing baselines with actual progress.
40
Fill in the blank: The relationship between cost and schedule is based on the principle that _______.
[time is money]
41
What does schedule refer to in project management?
Performing certain work over a certain time period.
42
What does cost refer to in project management?
The money spent to perform the work on a project over a certain period of time.
43
What principle illustrates the relationship between cost and schedule?
Time is money.
44
What are the three fundamental parameters of Earned Value Management (EVM)?
* Planned Value (PV) * Earned Value (EV) * Actual Cost (AC)
45
What does Planned Value (PV) represent?
The value that was planned to be created in the time spent so far.
46
What is Budget at Completion (BAC)?
The total budget authorized for performing the project work or a project activity.
47
How is Earned Value (EV) calculated?
EV = BAC × (work completed / total work required)
48
What is Actual Cost (AC)?
The total cost actually incurred performing the work for a project until a specific point.
49
What does Cost Variance (CV) measure?
The deviation of actual cost from earned value, calculated as CV = EV – AC.
50
What indicates good cost performance in terms of Cost Performance Index (CPI)?
A CPI value greater than one.
51
What does Schedule Performance Index (SPI) measure?
The efficiency of the schedule, calculated as SPI = EV / PV.
52
How is Planned Value (PV) calculated?
PV = BAC × (time passed / total schedule time)
53
What does a negative Schedule Variance (SV) indicate?
That the project is behind schedule.
54
What is the purpose of forecasting in project management?
Predicting future project information based on past performance.
55
How is Estimate to Complete (ETC) calculated at Budgeted Rate?
ETC = BAC – EV.
56
What does Estimate at Completion (EAC) at the Budgeted Rate calculate?
The total cost to complete the project assuming future work is at the budgeted rate.
57
What does To-Complete Performance Index (TCPI) predict?
The future performance needed to finish the work according to a specified goal.
58
What is the Triple Constraint in project management?
* Scope * Schedule * Cost
59
What happens if one parameter of the Triple Constraint changes?
At least one of the other two parameters must change as well.
60
True or False: The present version of PMBOK formally discusses the triple constraint.
False.
61
How can project success be defined?
Delivering the planned scope according to the planned schedule and within the planned budget.
62
What are the three components of the triple constraint?
Scope, schedule, and cost ## Footnote The triple constraint emphasizes that changing one component will affect the others.
63
True or False: The current version of PMBOK formally discusses the triple constraint.
False ## Footnote The PMBOK does not formally discuss the triple constraint, but it is still a relevant concept.
64
In project management, what must happen if the project is behind schedule?
At least one of the other two parameters (cost or scope) must change ## Footnote This may involve increasing funds or modifying project features.
65
What techniques can be applied when a project is behind schedule?
* Lead and lags * Float * Smoothing techniques ## Footnote These techniques are discussed in Chapter 5.
66
What is the relationship between the triple constraint and quality?
High-quality projects deliver required products on time and within budget ## Footnote Changes in scope, schedule, or cost can affect project quality.
67
What processes control changes to scope, schedule, and cost?
* Control Scope * Control Schedule * Control Cost ## Footnote These processes are crucial for managing project changes.
68
What is the purpose of earned value management (EVM)?
To compare project performance against the integrated baseline ## Footnote EVM uses actual cost (AC), earned value (EV), and planned value (PV).
69
What does project cost management consist of?
* Developing a cost management plan * Estimating costs * Determining budget * Controlling costs ## Footnote These components ensure effective financial oversight of the project.
70
What is the cost baseline?
The approved budget minus the management reserve ## Footnote It serves as a comparison point for cost performance.
71
What are the three fundamental parameters in project management?
Scope, schedule, and cost ## Footnote These parameters are intrinsically related to each other.
72
What is the definition of performance measurement baseline?
An approved integrated plan for scope, schedule, and cost ## Footnote It is used for measuring project performance.
73
What is the first process to perform for project cost estimates?
Estimate Costs ## Footnote This is the initial step before aggregating costs.
74
What is the earned value of a project if $160,000 has been spent and five miles of road have been completed out of a total budget of $600,000?
$200,000 ## Footnote This reflects the amount of work completed versus planned.
75
What is the planned value of the project at the end of the first three weeks if the work is uniformly distributed over 12 weeks?
$150,000 ## Footnote Planned value is based on the budget and time frame.
76
What is the cost variance if $160,000 has been spent and the earned value is $200,000?
$40,000 ## Footnote Cost variance indicates how much under or over budget the project is.
77
What is the schedule variance for the project if the planned value is $150,000 and the earned value is $200,000?
$50,000 ## Footnote Schedule variance shows the difference between planned and actual performance.
78
What does a CPI value of 1.25 and an SPI value of 1.33 indicate about a project?
The project is making faster progress and costing less than planned ## Footnote CPI and SPI are metrics used in earned value management.
79
What are the three elements of the integrated performance measurement baseline?
* Scope baseline * Schedule baseline * Cost baseline ## Footnote These elements are essential for performance measurement.
80
If an influential stakeholder requests to complete the project earlier, which two parameters are likely to be affected?
* Cost * Scope ## Footnote Changing the schedule often impacts these parameters.
81
Which process will you run to get work performance measurements or information for performance reports?
Monitor and Control Project Work ## Footnote This process is essential for tracking project performance.
82
What is the estimated range of cost for an activity estimated at $500 with ±10% accuracy?
$450–$550 ## Footnote This range reflects the potential variability in cost estimates.
83
Which of the following is not an input item in PMBOK for developing the cost management plan?
Quality management plan ## Footnote The project charter, schedule management plan, and risk management plan are relevant inputs.

CAPM® in Depth: Certified Associate in Project Management Study Guide for the CAPM® Exam (14 decks)

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