Chap 7. Project Cost Management

Question 1

What is value engineering in cost management?

Answer 1

a systematic approach to finding less costly ways to complete the same work.

Question 2

What is a life-cycle cost in cost management?

Answer 2

It is a cost associated with after-the-project costs, such as maintenance and service.

Question 3

Rank the cost estimation methods from least accurate to most accurate.

Answer 3

ROM (Rough Order Magnitude) <

Question 4

Do you need cost estimates before cost budgeting?

Answer 4

Yes.

Question 5

What are the 4 processes in project costs management?

Answer 5

1. Plan Cost Management Plan
2. Estimate Costs
3. Determine Budget
4. Control Costs

Question 6

What are the differences between cost estimates, basis of estimates and cost baselines?

Answer 6

1. Process difference:

Cost estimates and basis of estimates are Outputs of “Estimate Cost” Process. Cost Baseline is an output for Determine Budget process.

2. Tool & Technique differences:

Cost estimates uses various forms of analysis in estimating, while cost baseline is focused on cost aggregation and funding limit reconciliation.

Question 7

What is cost estimates? (Project Cost Management)

Answer 7

1. It is the output from Estimating Cost in Project Cost Management.
2. It includes probable costs assessed to complete project work, contingency $ for risks, management reserve for unplanned work.
3. To generate cost estimates, tool & techniques sued are various types of estimating technique, including analogous estimating, three-point estimating, etc.

Question 8

What is cost baseline? (Project Cost Management)

Answer 8

1. It is the output of Determine Budget process in Project Cost Management.
2. It is the approved version of the project budget, excluding management reserve.
3. It always goes after cost estimates is established.

Question 9

Project Budget = Management Reserve + Cost baseline
Cost baseline = Control Accounts
Control accounts = contingency reserve + Work Package Estimates

Answer 9

remember that!

Question 10

What is cost forecasts?

Answer 10

1. It is the calculated EAC (Estimates at Completion) or a Bottom-up EAC value that will be documented and communicated to stakeholder.
2. It is the outputs from Control Costs Process in Project Cost management.

Question 11

Key features of Control Costs from project cost management?

Answer 11

1. Control Costs maintains that cost baseline throughout the project.

Question 12

What is also called a top-down estimating and requires less time to complete the cost estimates?

Answer 12

Analogous Estimating.

Question 13

What type of cost estimates use a known parameter (like cost per unit) to estimate costs?

Answer 13

Parametric Estimating. Also includes regression analysis in parametric estimating.

Question 14

What type of estimates use the average of Optimistic costs, Most Likely Costs and Pessimistic Cost?

Answer 14

Three-point estimating

Question 15

What type of estimates use the average of Optimistic costs, Most Likely Costs and Pessimistic Cost, and weighted towards Most Likely?

Answer 15

PERT Estimating (program Evaluation and Review Technique)

Question 16

How can learning curve concept contributes to costs estimating?

Answer 16

Cost per unit decreases the more units produced.

Question 17

What are some examples of direct costs and indirect costs in estimating costs from Project Cost Management?

Answer 17

Direct costs: Direct costs applied to the specific project. For example, material, travel for personnel.

Indirect costs: costs that are shared between projects. For example, facilities, software licenses.

Question 18

What type of cost estimating method uses WBS to generate costs?

Answer 18

Bottom-Up Estimating