Chapter 7 Introducing Project Cost Management

Question 1

actual cost

Answer 1

The amount of funds the project has spent to date. The difference between actual costs and the earned value will reveal the cost variance.

Question 2

analogous estimating

Answer 2

This relies on historical information to predict estimates for current projects. Analogous estimating is also known as top-down estimating and is a form of expert judgment.

Question 3

bottom-up estimating

Answer 3

A technique where an estiate for each component in the WBS is developed and then totaled for an overall project budget. This is the longest method to complete, but it provides the most accurate estimate.

Question 4

budget at completion

Answer 4

The predicted budget for the project; what the project should cost when it is completed. Budget at completion represents 100 percent of the planned value for the project’s completion.

Question 5

chart of accounts

Answer 5

A coding system used by the performing organization’s accounting system to account for the project work.

Question 6

cost baseline

Answer 6

This shows what the project is expected to spend. It’s usually shown in a S-curve and allows the project mananger and management to predict when the project will be spending monies and over what duration. The purpose of the cost baseline is to measure and predict project performance.

Question 7

cost budgeting

Answer 7

A process of assigning a cost to an individual work package. This process shows costs over time. The cost budget results in an S-curve that becomes the cost baseline for the project.

Question 8

cost change control

Answer 8

This is part of the integrated change control system and documents the procedures to request, approve, and incorporate changes to project costs.

Question 9

cost control

Answer 9

an active process to control cause of cost change, to document cost changes, and to monitor cost fluctuations within the project. When changes occur, the cost baseline must be updated.

Question 10

cost estimating

Answer 10

The process of calculating the costs, by category, of the identified resources to complete the project work.

Question 11

cost management plan

Answer 11

A subsidiary plan of the overall project management plan that defines how costs will be estimated, budgeted, and controlled.

Question 12

cost performance index

Answer 12

The process of calculating the costs, by category, of the identified resources to complete the project work.

Question 13

cost variance

Answer 13

The difference between the earned value and the actual costs.

Question 14

direct costs

Answer 14

These costs are attributed directly to the project and cannot be shared with operations or other projects.

Question 15

earned value

Answer 15

the value of the work that has been completed and the budget for that work: EV = %Complete x BAC

Question 16

earned value management

Answer 16

Earned value management integrates scope, schedule, and cost to give an objective, scalable, point-in-time assessment of the project. EVM calculates the performance of the project and compares current performance against plan. EVM can also be a harbinger of things to come. Results early in the project can predict the likelihood of the project’s success or failure.

Question 17

estimate at completion

Answer 17

A hypothesis of what the total cost of the project will be. Before the project begins, the project manager completes and estimate for the project deliverables based on the WBS. As the project progresses, there will likely be some variances between what the cost estimate was and what the actual cost is. The EAC is calculated to predict what the new estimate at completion will be.

Question 18

estimate to complete

Answer 18

Represents how much more money is neeeded to complete the project work: ETC = EAC - AC.

Question 19

estimating publications

Answer 19

Typically, a commercial reference to help the project estimator confirm and predict the accuracy of estimates. If a project manager elects to use one of these commercial databases, the estimate should include a pointer to this document for future reference and verification.

Question 20

fixed costs

Answer 20

Costs that remain the same throughout the project.

Question 21

indirect costs

Answer 21

These costs can be shared across multiple projects that use the same resources - such as for a training room or piece of equipment.

Question 22

parametric modeling

Answer 22

A mathematical model based on known parameters to predict the cost of a project. The parameters in the model can vary based on the type of work being done. A parameter can be cost per cubic yard, cost per unit, and so on.

Question 23

parametric modling

Answer 23

A mathematical model based on known parameters to predict the cost of a project. The parameters in the model can vary based on the type of work being done. A parameter can be cost per cubic yard, cost per unit, and so on.

Question 24

planned value

Answer 24

The worth of the work that should be completed by a specific time in the project schedule.

Question 25

risk

Answer 25

An uncertain event that can have a positive or negative influence on the project’s success. It can affect the project costs, project schedule, and often both. All risks and their status should be recorded in the risk register.

Question 26

schedule performance index

Answer 26

This reveals the efficiency of work. The closer the quotient is to 1, the better: SPI = EV/PV.

Question 27

schedule variance

Answer 27

the difference between the planned work and the earned work.

Question 28

to-complete performance index

Answer 28

An earned value management formula that can forecast the likelihood of a project to achieve its goals based on what’s currently happening in the project.

Question 29

top-down estimating

Answer 29

A technique that bases the current project’s estimate on the total of a similar project. A percentage of the similar project’s total cost may be added to or subtracted from the total, depending on the size of the current project.

Question 30

variable costs

Answer 30

Costs that vary, depending on the conditions within the project.

Question 31

variance

Answer 31

the time or cost difference between what was planned and what was actually experienced.