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PMBOK 6th Edition > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

This includes he processes involved in planning, estimating m budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget.

A

Project cost management

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2
Q

The process of defining how the project costs will be estimated, budgeted, managed, monitored, and controlled.

A

Plan cost management

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3
Q

The process of developing an approximation of the monetary resources needed to complete project work.

A

Estimate costs

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4
Q

The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.

A

Determine budget

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5
Q

The process of monitoring the status of the project to update the project costs and manage changes to the cost baseline

A

Control costs

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6
Q

On smaller projects what project cost management processes are tightly linked and can be viewed as a single process that can be performed by a single person over a relatively short amount of time?

A

Cost estimating and cost budgeting

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7
Q

When is the ability to influence cost greatest?

A

Early stages of the project

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8
Q

is it true that, different stakeholders measure project costs in different ways and at different times.

A

Yes

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9
Q

What is the trend of project cost management that is the expansion of earned value management ?

A

Earned schedule (ES)

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10
Q

What is the equation for earned schedule management?

A

ES-AT

Earned schedule minus actual time

If the amount of earned schedule is greater than 0, then the project is considered ahead of schedule

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11
Q

What is the equation for schedule performance index (SPI) using earned schedule metrics?

A

ES/AT

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12
Q

What does the schedule performance index indicate?

A

The efficiency with which work is being accomplished .

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13
Q

What are tailoring considerations for project cost management?

A 
Knowledge management 
Estimating and budgeting
Earned value management 
Use of agile approach 
Governance
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14
Q

What happens in the case where there are high-variability project are subject to strict budgets?

A

The scope and schedule are more often adjusted to stay within cost constraints

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15
Q

How are cost estimations in an agile/adaptive environment?

A

It’s usually not as detailed and lightweight high level estimates are generated

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16
Q

The process of defining how the project costs will be estimated, budgeted, managed, monitored,and controlled.

A

Plan cost management

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17
Q

What’s the key benefit of the plan cost management process?

A

It provides guidance and direction on how the project costs will be managed throughout the project.

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18
Q

What’s documented in the cost management plan?

A

Cost management processes and their associated tools and techniques

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19
Q

What details concerning the project cost plan are in the project charter?

A

Pre-approved financial resources from which project costs are developed

Project approval requirements that will influence the management of the project costs

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20
Q

What components of the project management plan effect the cost management plan?

A

Schedule management plan

Risk management plan

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21
Q

What data analysis technique can be used for the plan cost management process?

A

Alternative analysis

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22
Q

What might alternative analysis include for the plan cost management process?

A

Reviewing strategic funding options such as self-funding with equity or funding with debt. Also, ways to acquire project resources such as making, purchasing, renting or leasing.

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23
Q

This is a component of the project management plan and describes how the project costs will be planned, structured, and controlled.

A

Cost management plan

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24
Q

What can the cost management plan Establish?

A

Units of measure (hours, liters, tons, lump sum etc)

Level of precision ($99.95 explains what to round to)

Level of accuracy (+ or - 10% for cost estimates and contingencies)

Organizational procedure links ( I.e. the control account from the WBS)

Control thresholds (variance allowed before action is taken)

Ruled of performance measurement (EVM rules for measurement are set)

Reporting formats

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25
Q

What is the WBS component used for the project cost accounting?

A

Control account

Each control account is assigned a unique code or account number (s) that links directly to the performing organizations accounting system

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26
Q

The

Recess of developing an approximation of the cost of resources needed to complete project work.

A

Estimate costs

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27
Q

What’s the key benefit of the Estimate costs process?

A

It determines the monetary resources required for the project

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28
Q

When estimating costs what should be considered?

A

Cost trade offs and risks

Make vs. buy
Buy vs. Lease
Sharing of resources

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29
Q

What is a cost estimate based on

A

Information known at a given point

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30
Q

As a project progresses through the project lifecycle what happens to project estimate accuracy?

A

It improves

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31
Q

What items are cost estimated for in a project?

A

All resources that will be charged to the project

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32
Q

This describes estimating methods that can be used and the level of precision and accuracy required for the cost estimate.

A

Cost management plan

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33
Q

What does the project scope statement reflect that effects cost estimates?

A

Funding constraints by period for the expenditure of project funds or other financial assumptions and constraints

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34
Q

This spreads cost over time, allocating funds to the resources needed to have the project meet its schedule.

A

Budget

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35
Q

Are estimated cost a budget?

A

No, they are just numbers.

Once you have determined when you will need those monies, it becomes a budge.

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36
Q

Cost of the response solutions for known project risks

A

Contingency reserve

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37
Q

What does the project scope statement reflect about cost?

A

The funding constraints by period for the expenditure of project funds or other financial assumptions and constraints

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38
Q

How does duration estimates of the project schedule affect cost estimates?

A

It affects cost estimates when resources are charged per unit of time and when there are seasonal fluctuations in costs. Also it affects the cost of financing (including interest charges)

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39
Q

How does the risk register effect cost estimates?

A

It provides detailed information that can be used to estimate costs

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40
Q

What are the enterprise environmental factors that can influence the estimate costs process

A

Market conditions
Published commercial information
Exchange rates and inflation

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41
Q

What is the formula for triangular distribution?

A

cE= (c0+cM+cP) / 3

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42
Q

What is the formula for Beta distribution?

A

CE= (c0+4cM+cP) / 6

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43
Q

What are some data analysis techniques used to estimate cost?

A

Alternative analysis
Reserve analysis
Cost of quality

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44
Q

What mother name for contingency reserves?

A

Contingency allowances

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45
Q

What is the budget within the cost baseline that is allocated for identified risks?

A

Contingency reserves

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46
Q

This part of the budget is meant to address the known unknowns

A

Contingency reserves

For example, rework for some project deliverables could be anticipated, while the amount of this rework is unknown.

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47
Q

What happens to the contingency reserve as more precise information about the project becomes available?

A

It may be used, reduced, or eliminated

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48
Q

What is a decision making technique used in the estimate costs process?

A

Voting

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49
Q

This is defined as including quantitative assessments of the probable costs required to complete work as well as contingency amounts to account for identified risks and management reserve to cover unplanned work.

A

Cost estimates

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50
Q

The supporting documentation of cost estimates should be

A

Clear and provide a complete understanding of how the cost estimate was derived

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51
Q

What are some examples of supporting detail for cost estimates?

A

Documentation of the basis of the estimate (I.e. how it was developed)

Documentation of all the assumptions made

Documentation of any known constraints

Documentation of identified risks included when estimating costs

Indication of the range of possible estimates (I.e. US$10,000 (+/- 10%))

Indication of the confidence level of the final estimate

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52
Q

What documents ignite be updated as a result of the cost estimates process?

A

Assumption log
Lessons learned register
Risk register

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53
Q

The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline

A

Determine budget

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54
Q

What is the key benefit of the determine budget process?

A

It determines the cost baseline against which project performance can be monitored and controlled

55
Q

For large scale projects that extend multiple years with multiple currencies what needs to be included?

A

The fluctuations of currencies need to be understood and built into the determine budget process

56
Q

How does the management reserve relate or work with the cost baseline?

A

The management reserve is not included in the cost baseline but is part of the overall project budget and funding requirements.

When an amount of management reserves is used to fund unforeseen work, the amount of management reserve used is added to the cost baseline, thus requiring an approved change to the cost baseline.

57
Q

When are analogous and parametric models most reliable?

A

When

Historical info used is accurate

Parameters used in the model are readily quantifiable

Models are scalable for various project sizes

58
Q

What does financing entail?

A

Acquiring funding for projects

59
Q

Describe funding limit reconciliation.

A

The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. A variance will sometimes necessitate the rescheduling of the work to level out the rate of expenditures. Imposed dates on the project schedule help to accomplish this.

60
Q

This is a summation of the approved budgets for the different schedule activities.

A

The cost baseline

61
Q

This is the approved version of the time-phased project budget, excluding any management reserves.

A

The cost baseline

62
Q

The summation of the control accounts make up…?

A

The cost baseline

63
Q

For projects that use earned value management what is the cost baseline referred to as?

A

The performance measurement baseline

64
Q

The time phased view of the cost baseline is typically displayed in the form of what shape?

A

S-curve

65
Q

What is aggregated into a control account in terms of cost estimates?

A

Work package cost estimates along with any contingency reserves estimated for the work packages

66
Q

From what are total funding requirements and periodic funding requirements derived?

A

Cost baseline

67
Q

How does funding often occur?

A

Incremental amounts and may not be evenly distributed

68
Q

What update is made to the project schedule after determining the budget?

A

Estimated costs for each activity may be recorded as part of the project schedule.

69
Q

The process of monitoring the status of the project to update the project costs and managing changes to the cost baseline.

A

Control costs

70
Q

What is the key benefit of the control cost process?

A

The cost baseline is maintained throughout the project.

71
Q

What does controlling cost mean opposed to just monitoring the expenditure of funds?

A

Analyzing the relationship between the consumption of project funds and the work being accomplished for such expenditures.

72
Q

How can an increase to the authorized budget be made?

A

By gaining approval through the Perform integrated change control process

73
Q

Earned value analysis (EVA) compares what?

A

The performance measurement baseline to the actual schedule and cost performance.

74
Q

What are the 3 key dimensions for each work package and control account that EVM develops?

A

Planned value
Earned value
Actual cost

75
Q

EVM integrates what to form the performance measurement baseline.

A

Scope baseline
Cost baseline
Schedule baseline

76
Q

The authorized budget assigned to schedule work. (Per activity in the WBS not including management reserve)

A

Planned value (PV)

77
Q

What’s the total planned value for the project also known as?

A

Budget at completion (BAC)

78
Q

The total of the PV is sometimes referred to as ?

A

Performance measurement baseline (PMB)

79
Q

How is planned value allocated?

A

By phase over the life of the project.

80
Q

At a given point in time the planned value defines what?

A

The physical work that should have been accomplished.

81
Q

A measure of work performed expressed in terms of the budget authorized for that work.

A

Earned value (EV)

82
Q

The budget associated with the authorized work that has been completed .

A

Earned value.

83
Q

What are the parameters for earned value in regards to PMB and EV?

A

The EV being measured needs to be related to the PMB, and the EV measured cannot be greater than the authorized PV budget for a component.

84
Q

What is often used to calculate the percent complete of a project.

A

EV (Earned value)

85
Q

Progress measurement criteria should be established for each …to measure work in progress.

A

WBS component

86
Q

How is earned value (EV) monitored?

A

Incrementally-to determine current status

And

Cumulatively-to determine the long term performance trends.

87
Q

The realized cost incurred for the work performed on an activity during a specific time period.

A

Actual cost (AC)

88
Q

The total cost incurred in accomplishing the work that the EV measured.

A

Actual cost (AC)

89
Q

The AC needs to correspond in definition to what?

A

What was budgeted in the PV and measured in the EV (direct hours only, direct cost only, or all cost including indirect costs)

90
Q

Does the AC have an upper limit?

A

Whatever is spent to achieve the EV will be measured

91
Q

What are the most frequently analyzed measurements?

A

Cost and schedule variances

92
Q

The percentage range of acceptable variances will tend to decrease as?

A

More work is accomplished

93
Q

What is an important aspect of project cost control?

A

Determining the cause and degree of variance relative to the cost baseline and deciding whether corrective or preventive action is required.

94
Q

What are some examples of variance analysis?

A

Schedule variance
Cost variance
Schedule performance index
Cost performance index

95
Q

What is the equation for variance at completion

A

VAC=BAC-EAC

Variance at completion=budget at completion - earned actual cost

96
Q

What is the equation for cost variance?

A

CV=EV-AC

Cost variance =earned value - actual cost

97
Q

What is the equation for schedule variance?

A

SV= EV-PV

Schedule variance = Earned value - planned value

98
Q

Describe schedule variance?

A

The amount by which the project is ahead or behind the planned delivery date, at a given point in time. A measure of schedule performance on a project.

99
Q

What is cost variance?

A

The amount of budget deficit or surplus at a given point in time, expressed as the difference between earned value and the actual cost. It is a measure of cost performance on a project.

100
Q

What does it mean when the EVA schedule variance is equal to zero?

A

The project is completed as all of the planned values have been earned

101
Q

Schedule variance is best used in conjunction with what?

A

Critical path method (CPM) scheduling and risk management

102
Q

What will cost variance be at the end of the project?

A

The difference between the budget at completion (BAC) and the actual amount spent.

103
Q

This represents the relationship of physical performance to costs spent.

A

Cost variance

104
Q

Is negative CV easy for the project to recover?

A

No

105
Q

A measure of schedule efficiency expressed as the ratio of earned value to planned value,

A

Schedule performance index (SPI)

106
Q

What does the schedule performance index measure?

A

How efficiently the project team is accomplishing the work.

107
Q

What does an SPI value less than 1.0 indicate?

A

Less work was completed than was planned

108
Q

What does an SPI greater than 1.0 indicate?

A

More work was completed than was planned.

109
Q

What is the equation for SPI?

A

SPI= EV/PV

110
Q

What does the cost performance index measure?

A

The cost efficiency for the work completed

111
Q

What is considered the most critical EVA metric?

A

Cost performance index

112
Q

What does a CPI value les than 1.0 indicate ?

A

A cost overrun for work completed

113
Q

What does a CPI value greater than 1.0 indicate?

A

A cost underrun of performance to date

114
Q

What is the equation for cost performance index?

A

CPI=EV/AC

115
Q

What is a measure of the cost efficiency of budgeted resources?

A

CPI

116
Q

Describe trend analysis.

A

Trend analysis examines project performance over time to determine if performance is improving or deteriorating.

117
Q

What are some examples of trend analysis techniques?

A

Charts

Forecasting

118
Q

If it becomes obvious that the BAC is no longer viable the project manager should….?

A

Consider the forecasted EAC (Estimate at Completion)

119
Q

Forecast are generated, updated and reissued based on…

A

Work performance data

120
Q

What are EACs typically based on?

A

Actual costs incurred for work completed plus an estimate to complete (ETC) the remaining work

121
Q

What is the most common EAC (Estimate at Completion) forecasting approach?

A

A manual bottom up summation by the project manager and project team

122
Q

What is the equation for the bottom up EAC method ?

A

EAC=AC+Bottom-up ETC

123
Q

This EAC method accepts the actual project performance to date (whether favorable or unfavorable) as represented by the actual costs, and predicts all future ETC Work will be accomplished at the budgeted rate.

A

EAC forecast for ETC work performed at the budgeted rate

EAC = AC + (BAC-EV)

124
Q

If current actual performance is unfavorable, should someone assume actual performance will improve?

A

No only if they have risk analysis to support the idea that future performance will improve

125
Q

This EAC method assumes that what the project has experienced to date can be expected to continue in the future. The ETC work is assumed to be performed at the same cumulative cost performance index (CPI) as that incurred by the project to date.

A

EAC forecast for ETC work performed at the present CPI.

Equation: EAC= BAC/CPL

126
Q

In this EAC method the ETC work will be performed at an efficiency rate that considers both the cost and schedule performance indices.

A

EAC forecast for ETC work considering both SPI and CPI factors

Most useful when the project schedule is a factor impacting the ETC effort

Variations of this method rank the CPI and SPI at different values (80/20, 50/50, etc.)

Equation:EAC=AC+[BAC-EV)/(CPI x SPI)]

127
Q

What is reserve analysis used for?

A

To monitor the status of contingency and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested

128
Q

What happens to the contingency amount when opportunities are captured and result in cost savings?

A

Funds may be added to the contingency amount or taken from the project as margin/profit.

129
Q

What if identified risks do not occur what happens to unused contingency reserves?

A

Unused contingency reserves may be removed from the project budget to free up resources for other projects or operations.

130
Q

A measure of the cost performance that is required to be achieved with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the outstanding work to the remaining budget.

A

To-complete performance index (TCPI)

131
Q

The calculated cost performance index that is achieved on the remaining work to meet a specified management goal, such as BAC or the EAC?

A

To-complete performance index

132
Q

What is the equation for TCPI ?

A

BAC:(BAC-EV)/(BAC-AC)

Once approved, the EAC may replace the BAC in the TCPI calculation.

133
Q

What Is the equation for the TCPI based on the EAC?

A

EAC:(BAC-EV)/(EAC-AC)

134
Q

What’s usually used to monitor the three EVM dimensions

A

PMIS

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