Chapter 7 Project Cost Management

Question 1

EVM

Earned Value Measurement

Answer 1

(PV-EV)

Question 2

ES

Earned Schedule

Answer 2

If greater than 0 project is ahead of schedule

Question 3

SPI

Answer 3

Schedule Performance Index - ES/AT. It indicates the efficiency with which work is being accomplished.

Question 4

Plan Cost Management

Answer 4

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

Occurs early in the project to create framework for cost management processes

Cost management plan - tools, techniques, and processes to manage costs

Question 5

Cost Management Plan

Answer 5

Component of the Project Management Plan that describes how project costs will be planned, structured and controlled. Units of measure, precision, control thresholds

Question 6

Cost Estimate

Answer 6

Quantitative assessment of the likely costs for resources required to complete the activity. It’s accuracy will increase as the project progresses.

Question 7

Bottoms Up Estimating

Answer 7

The cost of individual work packages or activities is estimated to the greatest level of specific detail.

Question 8

Three Point Estimating

Answer 8

Factoring in uncertainty and risk to define an estimate range.

Question 9

Triangular Distribution

Answer 9

CE= (cO + cM + cP)/3

Question 10

Beta Distribution

Answer 10

CE = (cO + cM + cP)/6

Question 11

Determine Budget

Answer 11

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

Includes all funds authorized to execute the project.

Question 12

Cost Quality

Answer 12

Evaluating the cost impact of additional investment in conformance vs. the cost of non-conformance

Question 13

Cost Baseline

Answer 13

Approved version of the time-phased project budget that includes contingency reserves but excludes management reserve.

Summation of the Control Accounts = Work Packages and Contingency Reserves

Question 14

Cost Aggregation

Answer 14

Cost estimates are aggregated by work packages in accordance with the WBS. Work package estimates are then aggregated for the higher component levels of the WBS and then ultimately the entire package.

Question 15

Reserve Analysis

Answer 15

One of the techniques used to determine a project budget. During Reserve Analysis, a project is analyzed from a cost overruns point of view and buffers are placed in appropriate place. These buffers are called Contingency and Management Reserves

Question 16

Management Reserves

Answer 16

An amount of the budget withheld for management control purposes and reserved for unforeseen work that is within the scope. It’s not included in the baseline.

Question 17

Contingency Reserve

Answer 17

Used to manage identified risks, or “known-unknown” (known = identified, unknown = risks). This reserve can be measured in either cost or time.

Not a random reserve; it is an estimated reserve based on various risk management techniques.

Question 18

Funding Limit Reconcilliation

Answer 18

The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project.

Question 19

Control Costs

Answer 19

Monitoring the status of the project to update project costs + managing changes to the baseline.

Any increase in budget must go through integrated change control.

Analyzing the relationship between the consumption of project funds and the work being accomplished

Question 20

EVA

Earned Value Analysis

Answer 20

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

Question 21

EVM

Earned Value Measurement

Answer 21

Integrates the scope baseline with cost baseline and schedule baseline to form the performance measurement baseline.

Question 22

PV

Planned Value

Answer 22

The authorized budget assigned to scheduled work. Defines the physical work that should be accomplished.

Question 23

Performance Measurement Baseline

Answer 23

Total planned value for the project

Question 24

BAC

Budget at Completion

Answer 24

The total amount budgeted for the project

Question 25

EV

Earned Value

Answer 25

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

Cannot be more than Planned Value

Used to calculate % complete on a project

Question 26

AC

Actual Cost

Answer 26

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

Question 27

SV

Schedule Variance

Answer 27

The measure of schedule performance expressed as the difference between Earned Value and Planned Value.

Question 28

CV

Cost Variance

Answer 28

The amount of budget deficit or surplus at a point in time. The difference b/w Earned Value and Actual Cost. Cost Variance at the end of a project is BAC-AC.

Indicates the relationship of the physical performance to costs spent.

Question 29

SPI

Schedule Performance Index

Answer 29

Measure of schedule efficiency expressed as the ratio of EV/PV.

Less than 1 = less work done
More than 1 = more work completed than planned

Question 30

CPI

Cost Performance Index

Answer 30

Measure of the cost efficiency of the budgeted resources, expressed as a ratio of EV/AC

Less than 1 = cost over-run
More than 1 = cost under-run