7 - Project Cost Management Terms Flashcards
Actual cost (AC)
The actual amount of monies the project has spent to date.
Analogous estimating
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.
Bottom-up 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 an most reliable methods to predict project costs.
Budget estimate
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% to +25%
Commercial database
A cost estimating approach that uses a database, typically software driven, to create the cost estimate project.
Contingency reserve
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.
Cost aggregation
Cost are paralled to each WBS work package. The costs of each work package are aggregated to their corresponding control accounts. Each control account then is aggregated to the sum of the project costs.
Cost baseline
A time-lapse exposure of when the project monies are to be spent in relation to cumulative values of the work completed in the project.
Cost budgeting
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 applies the cost estimates over time.
Cost change control system
A system that examines any changes associated with scope changes, the cost of materials, and the cost of any other resources, and the associated impact on the overall project cost.
Cost management plan
The cost management plan dictated how cost variances will be managed.
Cost of poor quality
The expenses incurred to recover from failing to adhere to the expected level of quality. (e.g. rework, defect repair, loss of sales/customers). AKA cost of non conformance to quality.
Cost of quality
The expense spent to attain the expected level of quality within a project. (Eg. training, testing, safety precautions)
Cost performance index (CPI)
Measure the project based on its financial performance. The formula is
CPI = EV / AC
Cost variance (CV)
The difference of the earned value amount and the cumulative actual costs of the project. The formula is
CV = EV - AC
Definitive estimate
Most accurate type of estimate. Used late in the planning processes and is associated with bottom-up estimating. WBS is needed to create the definitive estimate. The range of variance can be from -5% to +10%.