Chapter 5

Question 1

Project Cost Management Plan

Answer 1

Control Limits - Acceptable range of variances

Assignment of Cost - Identify where the monies will be spent and link the costs to the deliverables

Chart of Accounts - Predefined table of costs and categories for commonly completed activities

Project Budget - Defines the process fro creating, spending, and controlling the project budget

Cost Estimates

Cost Baseline - The agreed-upon level of costs

Question 2

Phased Gate Estimating

Answer 2

Divide your project into phases and extract cost estimates for each phase of the project.

Question 3

Three different categories of estimates

Answer 3

Rough order of magnitude - Used during the initiating process (Fast)

Budget estimate - Broad and used early in the planning process (top-down usually)

Definitive estimate - One of the most accurate and is used late in the planning process (bottom-up usually, takes the longest to create)

Question 4

Bottom-up Cost Estimating

Answer 4

The process of creating a detailed estimate for each work component (labor and materials) and accounting for each varying cost burden. The bottom-up cost estimates are based on the WBS and the WBS dictionary, as these documents define each element of the project deliverables.

Question 5

Three Point or Triangular estimate

Answer 5

This approach uses the average of pessimistic, most likely, and optimistic estimates.

Question 6

Program Evaluation and Review Technique (PERT)

Answer 6

PERT is ideal for time and cost estimates to complete activities. PERT uses a weighted average to predict how long the activity may take.

Question 7

Top-down Estimating

Answer 7

Allows a project manager to take a very similar projects budget, and arrive at a reasonable budget for the current project. Top-down estimates are not as reliable or usable as bottom-up estimates.

Question 8

Artifacts

Answer 8

Historical information from previous projects.

Question 9

Analogous Estimating

Answer 9

Relies on historical information to predict the cost of the current project. It is a type of top-down estimating. This takes the actual cost of a historical project as the basis for the current project. This approach takes less time to complete than other models but it is also less accurate. Good for getting a general idea of what a project may cost.

You can only do analogous estimating if you have historical information. If your organization has never done this type of project work before, then you can’t create an analogous estimate because there is nothing to creat an analogy with

Question 10

Parametric Modeling

Answer 10

Uses a mathematical model based on known parameters to predict the cost of a project. This uses top-down approach.
Ex. cost per unit installed, cost per machine delivered.

Question 11

Budget at Completion (BAC)

Answer 11

Is the sum of the budgets for every phase of your predictive project.

Question 12

Zero-based Budgeting

Answer 12

Means that the budget for a department or program to be created must always start at zero, rather than a dollar amount from a similar project, and the new expenses are factored in.

Question 13

Capital Expenses (CapEx) vs Operational Expenses (OpEx)

Answer 13

Capital expenses are often related to projects, as these expenses are big purchases that will be implemented into the organization and used for many years.

Operational expenses include expenses such as payroll, facilities, software management, and the general cost of doing business.

Operational expenses are sometimes called “the cost of doing business” and are ongoing. Capital expenses are singular are not ongoing.