All-In-One Chapter 7 - Managing Project Costs 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 and 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 of the estimate can be from -10 percent to +25 percent
Commercial database
a cost-estimating approach that uses a database, typically software-driven, to create the cost estimate for a 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
costs are parallel 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 dictates how cost variances will be managed
Cost of poor quality
the monies spent to recover from not adhering to the expected level of quality.
Cost of quality
the monies spent to attain the expected level of quality within a project.
Cost performance index (CPI)
measures 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
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
Direct costs
costs are attributed directly to the project work and cannot be shared among projects
Earned Value (EV)
earned value is the physical work completed to date and the authorized budget for that work. It is the percentage of the BAC that represents the actual work completed in the project
Estimate at completion (EAC)
these forecasting formulas predict the likely completed costs of the project based on current scenarios within the project
Estimate to complete (ETC)
an earned value management 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
Fixed costs
costs that remain constant throughout the life of the project
Funding limit reconciliation
an organization’s approach to managing cash flow against the project deliverables based on a schedule, milestone accomplishment, or data constraints
