7 Project Cost Management Terms

Question 1

Actual cost (AC)

Answer 1

The actual amount of monies the project has spent to date.

Question 2

Analogous estimating

Answer 2

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.

Question 3

Bottom-up estimating

Answer 3

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.

Question 4

Budget estimate

Answer 4

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.

Question 5

Commercial database

Answer 5

A cost-estimating approach that uses a database, typically software-driven, to create the cost estimate for a project.

Question 6

Contingency reserve

Answer 6

A contingency allowance to account for overruns in costs. Contingency allowances are used at the project manager’s discretion and with management’s approval to counteract cost overruns for scheduled activities and risk events.