Chapter 7: Project Cost Management Flashcards
Which tool and technique is common to the six project integration management processes?
Expert Judgement
07.1.2.1 Expert Judgment
What is expertise provided by any group or individual, applied to technical and management details associated with creating the output(s)?
Expert judgement
07.1.2.1 Expert Judgment
What does NPV stand for?
Net Present Value
07.1.2.2 Analytical Techniques
At initiation, a ROM can be expressed in what range?
The accuracy of a project estimate will increase as the project progresses through the project life cycle.
A project in the initiation phase may have a rough order of magnitude (ROM) estimate in the range of −25% to +75%.
07.2 Estimate Costs
How are cost estimates expressed?
In units of currency and in some instances, other units of measure such as staff hours or days.
07.2 Estimate Costs
How are cost estimates refined?
Over the course of the project. Accuracy increases as the project progresses through the project life cycle.
07.2 Estimate Costs
How is the cost baseline typically depicted?
An S-curve
07.3.3.1 Cost Baseline
At initiation, a ROM can be expressed in what range?
A project in the initiation phase may have a rough order of magnitude (ROM) estimate in the range of −25% to +75%.
This will narrow as the project progresses and more is known.
07.2 Estimate Costs
How low can ROM estimates eventually narrow over the course of a project?
As more information is known, definitive estimates could narrow the range of accuracy to -5% to +10%.
07.2 Estimate Costs
How are cost estimates refined?
Over the course of the project. Accuracy increases as the project progresses through the project life cycle.
07.2 Estimate Costs
What plan includes project staffing attributes, personnel rates and related rewards/ recognition for developing the project cost estimate?
The human resource management plan
07.2.1.2 Human Resource Management Plan
What can provide the recommended maximum activity costs from prior, similar projects?
Expert judgement
07.2.2.1 Expert Judgment
What kind of estimating uses a statistical relationship between historical data and other variables to calculate (either or both) duration and cost?
Parametric estimating
07.2.2.3 Parametric Estimating
What estimating technique creates three estimate to improve the quality of the estimating process to define an approximate range for an activity’s costs?
Three-point Estimating
07.2.2.5 Three-Point Estimating
What are the three enterprise environmental factors influencing how we estimate costs?
- Market Conditions
- Published Commercial Information
- Input provided by the Enterprise/ Organization
07.2.1.6 Enterprise Environmental Factors
When is analogous estimating often used?
Whenever there is a limited amount of detailed information.
Analogous cost estimating is generally less costly and less time consuming than other techniques, but it is also generally less accurate.
07.2.2.2 Analogous Estimating
Which kind of cost estimating is fast and not as costly as other techniques, but more exact than analogous?
Parametric estimating
07.2.2.3 Parametric Estimating
What is the relationship between these things?
Authorized cost baseline
Cost performance baseline
Total cost baseline
Cost Baseline
They are the time-phased budget at completion [BAC].
This equals the Total Planned Value [TPV] at project completion
07.4.2.1 Earned Value Management
What contains applicable contract information and cost related to purchases?
Agreements
07.3.1.8 Agreements
What describes how the project costs will be planned, structured, and controlled?
Cost Management Plan
07.1.3.1 Cost Management Plan
What is it called when the project team takes the cost estimates that were created for each activity and adds them together by WBS work packages?
Cost aggregation
07.3.2.1 Cost Aggregation
What is the approved amount of money or “time phased BAC” by work package, used for comparison to measure, monitor and control overall cost performance through the project?
Often depicted in the form of an S-curve….
Cost baseline
07.3.3.1 Cost Baseline
What are the results of parametric or analogous estimates involving the use of project characteristic (parameters) to develop mathematical models to predict total project costs?
Historical relationships
07.3.2.4 Historical Relationships
What are the elements that are developed and monitored for each work package in EVM ?
- PV = Planned value
- EV = Earned value
- AC = Actual cost
07.4.2.1 Earned Value Management
When is the greatest ability to influence cost in a project?
The ability to influence cost is greatest at the early stages of the project, making early scope definition critical.
7.0 Project Cost Management
What are total costs actually incurred and recorded in accomplishing work performed during a given time period for a schedule activity or work breakdown structure component?
Actual Cost (AC)
Actual cost can sometimes be direct labor hours alone, direct costs alone, or all costs including indirect costs. Also referred to as the actual cost of work performed (ACWP).
7.4.2.1 Earned Value Management
What is the authorized budget assigned to the scheduled work to be accomplished for a schedule activity or work breakdown structure component?
Planned Value (PV)
Also referred to as the budgeted cost of work scheduled (BCWS).
7.4.2.1 Earned Value Management
What is a measure of schedule efficiency on a project?It is the ratio of earned value (EV) to planned value (PV).
Schedule Performance Index (SPI)
The SPI = EV divided by PV. An SPI equal to or greater than one indicates a favorable condition and a value of less than one indicates an unfavorable condition. See also earned value management.
7.4.2.1 Earned Value Management
What is a measure of cost efficiency on a project? It is the ratio of earned value (EV) to actual costs (AC).
Cost Performance Index (CPI)
CPI = EV divided by AC. A value equal to or greater than one indicates a favorable condition and a value less than one indicates an unfavorable condition.
7.4.2.1 Earned Value Management
What are the four formulas for calculating EVM?
- CV = EV - AC
- CPI = EV / AC
- SV = EV - PV
- SPI = EV /PV
7.4.2.1 Earned Value Management
What is Budgeted Cost of Work Scheduled (BCWS) equal to?
Planned Value (PV)
7.4.2.1 Earned Value Management
What is Budgeted Cost of Work Performed (BCWP) equal to?
Earned Value (EV)
7.4.2.1 Earned Value Management
What is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline?
Determine Budget
7.3 Determine Budget
What is VAC?
Variance at completion
A projection of the amount of budget deficit or surplus, expressed as the difference between the budget at completion and the estimate at completion.
7.4.2.4 Performance Reviews
What is COQ?
Cost of Quality
7.2.2.7 Cost of Quality (COQ)
What is BAC?
Budget at completion
The total planned value for the project.
7.4.2.1 Earned Value Management
What is the process of establishing the policies, procedures, and documenting from planning, managing, expending, and controlling the project costs?
Plan Cost Management
7.1 Plan Cost Management
What is the process of developing an approximation of the monetary resources needed to complete the project activities?
Estimate Costs
7.2 Estimate Costs
What is derived from the cost baseline and set up to exceed the cost baseline for early progress or cost overruns?
Project Funding Requirements
7.3.3.2 Project Funding Requirements
What includes projected expenditures plus anticipated liabilities?
Project Funding Requirements
7.3.3.2 Project Funding Requirements
What is a commonly used and widely adopted method used for performance measurement?
Earned Value Management
7.4.2.1 Earned Value Management
What requires the formation of an integrated baseline against which performance is measured?
Earned Value Management
7.4.2.1 Earned Value Management
What is another definition for PV = Planned Value?
BCWS = Budgeted Cost of Work Scheduled
7.4.2.1 Earned Value Management
What is another definition for EV = Earned Value?
BCWP = Budgeted Cost of Work Performed
7.4.2.1 Earned Value Management
What develops and monitors three elements for each work package and control account?
Earned Value Management = EVM
7.4.2.1 Earned Value Management
What is the value of the work performed expressed in the terms of the approved budget assigned to that work?
Earned Value = EV
7.4.2.1 Earned Value Management
What is another definition for Actual Cost = AC?
ACWP = Actual Cost of Work Performed
7.4.2.1 Earned Value Management
What is the CPI and who is it for?
Cost Performance Index, to be reviewed by management
7.4.2.1 Earned Value Management
What is SPI and who is it for?
Schedule Performance Index, to be reviewed by management
7.4.2.1 Earned Value Management
What is CV and who is it for?
Cost variance, for the project team
7.4.2.1 Earned Value Management
What is the SV and who is it for?
Schedule variance and it is for the project team
7.4.2.1 Earned Value Management
What is the process used to determine how much more money we need to complete a project?
Forecasting
7.4.2.2 Forecasting
What monitor + controlling process is used to monitor the project status to update the the project budget and managing changes to the cost baseline?
Control Costs
7.4 Control Costs
What process provides the means to recognize variances from the original plan to take corrective action or to minimize risks?
Control Costs
7.4 Control Costs
What is the process for updating the budget where it involves recording actual cost spent to date?
Control Costs
7.4 Control Costs
What is a BAC?
Budget at completion
7.4.2.1 Earned Value Management
What is the calculated projection of cost performance that must be achieved on the remaining work to meet a goal?
TCPI
7.4.2.3 To-Complete Performance Index (TCPI)
What else is the BAC known as?
Total PV at project completion
7.4.2.1 Earned Value Management
What is the EAC based on?
The actual cost incurred for the work completed plus the Estimate to Completion (ETC).
7.4.2.2 Forecasting
What offers a clear and complete understanding of how the cost estimates were derived and is an input to the Determine Budget process?
Basis of estimates
7.2.3.2 Basis of Estimates
What contains a planned start and finish date for every project activity?
Project schedule
7.2.1.4 Project Schedule
What defines how risk budgets, contingencies and management reserves will be reported and accessed?
The Cost Management Plan
7.1.3.1 Cost Management Plan
What gives guidance on how the HR of the project should be defined, staffed, managed and released?
Human resource management plan
7.2.1.2 Human Resource Management Plan
What “Identify Risks” input contains the likely scheduled activity cost estimates as they relate to risk?
Activity cost estimates
7.2.3.1 Activity Cost Estimates
What three types of information in the Project Management Plan inform the Cost management plan?
- Scope Baseline
- Schedule Baseline
- Other information (cost related info from the project management plan)
7.1.1.1 Project Management Plan
What are the four processes contained by the Cost Management Knowledge Area used to plan the costs and budget of the project, as well as guarantee that the project completes on the approved budget?
- Plan Cost Management
- Estimate Costs
- Determine Budget
- Control Costs
7.0 Project Cost Management
What five considerations should be made for making, purchasing, renting or leasing?
- Payback period
- Return on investment (ROI)
- Internal rate of return (IRR)
- Discounted cash flow
- Net present value (NPV)
7.1.2.2 Analytical Techniques
