7 - Project Cost Management Terms Flashcards

1
Q

Actual cost (AC)

A

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

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2
Q

Analogous estimating

A

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.

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3
Q

Bottom-up estimating

A

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.

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4
Q

Budget estimate

A

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%

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5
Q

Commercial database

A

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

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6
Q

Contingency reserve

A

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.

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7
Q

Cost aggregation

A

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.

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8
Q

Cost baseline

A

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.

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9
Q

Cost budgeting

A

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.

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10
Q

Cost change control system

A

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.

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11
Q

Cost management plan

A

The cost management plan dictated how cost variances will be managed.

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12
Q

Cost of poor quality

A

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.

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13
Q

Cost of quality

A

The expense spent to attain the expected level of quality within a project. (Eg. training, testing, safety precautions)

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14
Q

Cost performance index (CPI)

A

Measure the project based on its financial performance. The formula is
CPI = EV / AC

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15
Q

Cost variance (CV)

A

The difference of the earned value amount and the cumulative actual costs of the project. The formula is
CV = EV - AC

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16
Q

Definitive estimate

A

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%.

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17
Q

Direct Costs

A

Attributed directly to the project work and cannot be shared among projects (e.g. travel, hotels, phone charges etc.)

18
Q

Earned Value (EV)

A

EV is the physical work completed to date and the authorized budget for that work. It is the % of the BAC (budget at completion) that represents the actual work completed in the project.

19
Q

Estimate at completion (EAC)

A

These forecasting formulas predict the likely completed costs of the project based on current scenarios within the project.

20
Q

Estimate to complete (ETC)

A

An earned value mgmt formula that predicts how much funding the project will require to be completed.
Three variations of this formula are based on conditions the project may be experiencing.

21
Q

Fixed costs

A

Costs that remain constant throughout the life of the project.

22
Q

Funding limit reconciliation

A

An organization’ approach to managing cash flow against the project deliverables based on a schedule, milestone accomplishments or data constraints.

23
Q

Indirect costs

A

Costs that are representative of more than one project (e.g. utilities, PM software etc…)

24
Q

Known unknown

A

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.

25
Q

Learning curve

A

An approach that assumes the cost per unit decreases the more units the workers completes. Since workers learn and gain experience.

26
Q

Oligopoly

A

A market condition where the market is so tight that the actions of one vendor affect the actions of all the others.

27
Q

Opportunity costs

A

The total cost of the opportunity that is refused

28
Q

Parametric estimating

A

A parametric model that extrapolates what costs will be needed for a project (e.g. cost/unit; cost/hour). It can include variables and points based on conditions.

29
Q

Planned value (PV)

A

Work that is scheduled and budget authorized to accomplish that work. It is the % of the BAC that reflects where the project should be at this point in time.

30
Q

Project variance

A

The final variance, which is discovered only at the project’s completion. The formula
VAR = BAC - AC

31
Q

Regression analysis

A

Statistical approach to predict what future values may be, based on historical values. Regression analysis creates quantitative predictions based on variables within one value to predict variables in another.
This form of estimating relies solely on pure statistical math to reveal relationships between variables and to predict future values.

32
Q

Reserve analysis

A

Cost reserves are for unknown unknowns within a project. The mgmt reserve is not part of the project costs baseline, but is included as part of the project budget.

33
Q

Rough order of magnitude

A

This rough estimate is used during the initiating process and in top-down estimates. The range of variance for the estimate can be from -25% to + 75%.

34
Q

Schedule performance index (SPI)

A

Measure the project based on its schedule performance.

SPI = EV / PV

35
Q

Schedule variance (SV)

A

The difference between earned value (EV) and the planned value (PV).
SV = EV - PV

36
Q

Single source

A

Many vendors can provide what your project needs, but you prefer to work with a specific vendor.

37
Q

Sole source

A

Only one vendor can provide what your project needs to purchase. (e.g. specific consultant, unique material).

38
Q

Sunk costs

A

Expenses that have already been invested in a project.

39
Q

To-Complete Performance Index (TCPI)

A

A formula to forecast the likelihood of a project to achieve its goals based on what’s happening in the project right now.
There are 2 different flavors for the TCPI, depending on what you want to accomplish.
To see if the project can meet the budget at completion: TCPI = (BAC - EV) / (BAC - AC)
To see if the project can meet the newly created estimate at completion: TCPI = (BAC - EV) / (EAC - AC)

40
Q

Variable costs

A

Costs that change based on the conditions applied in the project (the number of meeting participants, supply/demand of materials etc…)

41
Q

Variance

A

The difference between what was expected and what was experienced.

42
Q

Variance at completion (VAC)

A

A forecasting formula that predicts how much variance the project will likely have based on current conditions within the project.
VAC = BAC - EAC