Chapter 7 - Project Cost Management

Question 1

Cost?

Answer 1

A resource sacrificed to achieve specific objective

Question 2

Project Cost Management Processes

Answer 2

• Planning cost management
• Estimating costs
• Determining the budget
• Controlling costs

Question 3

Cost Management Basic Principles

Answer 3

• Profits (revenue minus expenditure)
• Profit margin (ratio of revenue to profits)
• Life cycle costing (total cost of ownership)
• Cash flow analysis (estimated annual costs and benefits -> annual cash flow)

Question 4

Types of Costs and Benefits

Answer 4

• Tangible
• Intangible
• Direct costs
• Indirect costs
• Sunk cost

Question 5

Reserves

Answer 5

• contingency
  future situations partially planned for
• management
  unpredictable future situations

Question 6

Cost Management Plan (includes)

Answer 6

• level of accuracy and units of measure
• organisational procedure links
• control thresholds
• rules of performance measurement
• reporting formats
• process descriptions

Question 7

Types of Cost Estimates

Answer 7

ROM (rough order of magnitude)
- 3-5 yrs before project completion, -50% to +100%

Budgetary
- 1-2 yrs out, -10% to +25%

Definitive
- >1 yr out, -5% to +10% accurate

Question 8

Cost Estimates Tools and Techniques

Answer 8

• Analogous/top-down estimates
• Bottom-up estimates
• parametric modelling
• 3-point

Question 9

Project Cost Control

Answer 9

• monitoring cost performance
• ensure only appropriate changes are included in baseline
• inform stakeholders of cost affecting changes to project

Question 10

EVM

Answer 10

• project performance measurement technique; scope, time, cost data

Question 11

EVM calculations

Answer 11

cv = ev - ac 
sv = ev - pv 
cpi = ev/ac 
spi = ev/pv 
eac (estimate at completion) = bac/cpi 
estimated time to complate = original time / SPI