7 - Project Cost Management Flashcards
The actual amount of monies the project has spent to date.
Actual Cost (AC)
An approach that relies on historical information to predict the cost of the current project. It is also known as top-down estimating and is the least reliable of all the cost-estimating approaches.
Analogous Estimating
An estimating approach that starts from zero, accounts for each component of the WBS, and arrives at a sum for the project. It is completed with the project team and can be one of the most time-consuming and most reliable methods to predict project costs.
Bottom-Up Estimating
This estimate is also somewhat broad and is used early in the planning processes and also in top-down estimates. The range of variance for the estimate can be from –10 percent to +25 percent.
Budget Estimate
A cost-estimating approach that uses a database, typically software-driven, to create the cost estimate for a project.
Commercial Database
An allowance to account for overruns in costs. Used at the project manager’s discretion and with management’s approval to counteract cost overruns for scheduled activities and risk events.
Contingency Reserve
Costs are parallel to each WBS work package. The costs of each work package are summed up to their corresponding control accounts. Each control account then is summed to the project costs.
Cost Aggregation
The approved version of the time-phased project budget, excluding any management reserves, which can be changed only through formal change control procedures and is used as a basis for comparison to actual results.
Cost Baseline
The cost aggregation achieved by assigning specific dollar amounts for each of the scheduled activities or, more likely, for each of the work packages in the WBS.
Cost Budgeting
A component of a project or program management plan that describes how costs will be planned, structured, and controlled.
Cost Management Plan
The monies spent to recover from not adhering to the expected level of quality. Examples may include rework, defect repair, loss of life or limb because safety precautions were not taken, loss of sales, and loss of customers. This is also known as the cost of nonconformance to quality.
Cost of Poor Quality
All costs incurred over the life of the product by investment in preventing nonconformance to requirements, appraisal of the product or service for conformance to requirements, and failure to meet requirements.
Cost of Quality
MA measure of the cost efficiency of budgeted resources expressed as the ratio of earned value to actual cost.
The formula is EV/AC
Cost Performance Index (CPI)
The amount of budget deficit or surplus at a given point in time, expressed as the difference between the earned value and the actual cost.
The formula is EV – AC.
Cost Variance (CV)
This estimate type is one of the most accurate. It’s used late in the planning processes and is associated with bottom-up estimating. You need the WBS in order to create the definitive estimate. The range of variance for the estimate can be from –5 percent to +10 percent.
Definitive Estimate
Costs are attributed directly to the project work and cannot be shared among projects (for example, airfare, hotels, long-distance phone charges, and so on).
Direct Costs
The measure of work performed expressed in terms of the budget authorized for that work
Earned Value (EV)
The expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete.
Estimate At Completion (EAC)
The expected cost to finish all the remaining project work.
Estimate To Complete (ETC)
Costs that remain constant throughout the life of the project (the cost of a piece of rented equipment for the project, the cost of a consultant brought on to the project, and so on).
Fixed Costs
The process of comparing the planned expenditure of project funds against any limits on the commitment of funds for the project to identify any variances between the funding limits and the planned expenditures.
Funding Limit Reconciliation
Costs that are representative of more than one project (for example, utilities for the performing organization, access to a training room, project management software license, and so on).
Indirect Costs
An event that will likely happen within the project, but when it will happen and to what degree is unknown. These events, such as delays, are usually risk-related.
Known Unknown
An approach that assumes the cost per unit decreases the more units workers complete, because workers learn as they complete the required work.
Learning Curve
