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PMP With PMI > Chapter Seven | Cost Management > Flashcards

Chapter Seven | Cost Management Flashcards

1
Q

What does AC stand for and the interpretation

A

Actual cost

As of today, what is the actual cost incurred for the work completed?

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2
Q

What does AT stand for and def

A

Actual time

Actual time used to complete an activity

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3
Q

What does BAC stand for And what is the interpretation?

A

Budget at completion

How much did we budget for the total project effort?

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4
Q

What does COQ stand for

A

Cost of quality

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5
Q

What does CPI stand for

A

Cost performance index

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6
Q

What does CV stand for

A

Cost variance

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7
Q

What does EAC stand for

A

Estimate at completion

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8
Q

What does ES stand for and def

A

Earned schedule

Time allotted to complete an activity

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9
Q

What does ETC stand for, def and formula

A

Estimate to complete

Represents the funds needed to finish the project based on the current spending efficiency of the project

ETC= EAC - AC

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10
Q

What does EVA stand for and def

A

Earned value analysis

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

A snapshot in time

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11
Q

What does EVM stand for and def

A

Earned value management

Identifies and monitors key dimensions for each work package, control account, or total project budget BAC

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12
Q

What does IRR stand for

A

Internal rate of return

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13
Q

What does NPV stand for

A

Net present value

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14
Q

What does PERT stand for

A

Program evaluation and review technique

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15
Q

What does PMB stand for

A

Performance measurement baseline

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16
Q

What does PV stand for and interpretation

A

Planned value

As of today, but is there estimated value of the work planned, what “should” be done?

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17
Q

What does ROM stand for

A

Rough order of magnitude

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18
Q

What does SPI stand for

A

Schedule performance index

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19
Q

What does SV stand for

A

Schedule variance

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20
Q

What does TCPI stand for and def

A

To complete performance index

How to finish project on original budget

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21
Q

What does VAC stand for, def and formula

A

Variance at completion

The difference between the original budget at completion and the estimate at completion

This tells us how much the completed project was over or under budget

VAC= BAC - EAC

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22
Q

What is project cost management?

A

The process involved in planning estimating budgeting financing funding managing and controlling costs so the project can be completed within the approved budget

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23
Q

Once you pass the project on to where it will live

the impact on the budget of the department you pass this back to Is called what?

A

Life cycle costing

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24
Q

What needs to be considered and tailoring a project cost plan? 5

A

Knowledge management

estimating and budgeting

earned value management

use of agile approach

governance

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25
Q

Agile| Detailed estimates are only used for a what?

A

Short term planning in a just in time style

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26
Q

7.1. Plan cost management

What does this mean and what is the benefit?

A

The process of defining HOW the project cost will be estimated budget and managed monitored and controlled.

The key benefit is that it provides guidance and direction on how the project costs will be managed throughout the project

This is for the team

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27
Q

7.1. Cost can be either ________ or _________

A

Variable costs or fixed costs

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28
Q

7.1 What does variable cost mean and what are three examples

A

Cost that change with the amount of production or work

material

equipment

project labor

29
Q

7.1 What does fixed costs mean and what are two examples

A

Costs that do not change as production changes

set up cost

facility rent

30
Q

7.1 What is direct cost and what are some examples

A

Items or services used ONLY for the project

Travel expenses 
material 
project office space 
training 
equipment 
labor
31
Q

7.1 What is the definition of indirect cost and examples

A

Items or services used for multiple projects, functional, or operational areas

You pay your share

Taxes 
maintenance 
utilities 
security 
overhead 
IT support 
salaries 
services 
office expenses
32
Q

NOTE

7.1 You cannot complete project budget until risk management plan is completed

A

.

33
Q

7.1. Output

Cost mng plan establishes

Units of measure 
level of precision 
level of accuracy for estimating 
organizational procedure links 
rules for measuring cost performance 
reporting formats and frequencies 
strategic funding choices 
control thresholds
A

.

34
Q

7.1 output

What does the control thresholds do

A

Control threshold to tell you the amount of variation allowed from a baseline

Crossing the threshold triggers a corrected or preventative action

35
Q

7.2 cost estimating

What is cost estimating?

A

The process of developing the likely costs for resources required to complete the project work and activities

The likely cost for resources required to complete an activity and includes cost trade-offs and risk

36
Q

7.2 What does estimating cost process results in

A

A set of activity cost estimates and the basis for each estimate

37
Q

7.2 What are the three types of estimates and the ranges?

A

Rough order of magnitude estimate
(-25% to +75%)

budget estimate

definitive estimate
(-5% to +10%)
38
Q

7.2 T&T

What are the four types of estimating tools and techniques

A

Analogous estimating

parametric estimating

bottom up estimating

three point estimating

39
Q

7.2 T&T

What is analogous estimating aka And when is it used?

(Top down)

A

Also known as management expectations

applied early in a project when limited details are available

utilizes expert judgment and historical information

provides gross value estimate of the activity or summary activities

40
Q

7.2 T&T

What is parametric estimating and what does it provide?

(Remember meters example)

A

When you trust the numbers

Uses a relationship between historical data and variables to calculate an estimate for an activity

provides higher level accuracy depending on sophistication and underlying data built into the model

can be applied to the total project or to segments of the project

41
Q

7.2 T&T

Which technique provide the greatest level of detail

A

Bottom up estimating

42
Q

7.2 T&T

What are the two types of three point estimating?

A

Beta distribution

triangular distribution

43
Q

7.2 T&T

What are the two types of reserves And definitions

A

Contingency reserves
KNOWN-UNKNOWN
Funds within the cost baseline, budgeted for the uncertainty, or identified risks that can affect a project

Management reserves 
UNKNOWN-UNKNOWN
or force majeure 
can affect the project 
are NOT included in the baseline but are part of the overall funding
44
Q

7.2 output

What is the cost estimate output defined as

A

Quantitative evaluation of the probable costs to complete project work as well as contingency reserves for identified risk and management reserves to cover unplanned work

45
Q

7.3 What is the definition of determine budget?

A

Determine budget is the process of aggregating the costs of the activities to establish an authorized cost baseline

includes all funds required to execute the project

the result of this aggregation is the COST BASELINE OR BUDGET

46
Q

7.3 T&T

What happens in cost aggregation (the process)

A

To create a budget activity costs are rolled up to work package cost

Work package cost along with the cost of risk contingency reserves are then rolled up to control accounts

Summation of the control accounts make up the project cost baseline also known as the budget at completion (BAC)

Management reserves are not part of the BAC

47
Q

7.3 T&T

What is another way of thinking about funding limit reconciliation

A

Balancing your checkbook

48
Q

7.3 output Note

Cost baseline can only be changed through integrated change control procedures. Developed as a summation of the approved budgets by time.

Typically shown as an S curve to compared to actual costs.

A

.

49
Q

7.3 output

And earned value management the cost performance baseline is also called what?

A

Performance measurement baseline (PMB)

50
Q

7.4 What does the control costs process do and what are the key benefits

A

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

key benefit is that it provides the means to monitor the plan and recognize variances in order to take correct of action and minimize risk

51
Q

7.4 What is the key to effective cost control

A

The management of the approved cost baseline and changes to that baseline

52
Q

7.4 What will impact the cost of a project the most?

A

Project changes

53
Q

7.4 T&T control cost

What does earned value analysis integrate in order to form what?

A

Earned value analysis integrates the baselines for scope, cost, and schedule to form the performance measurement baseline

54
Q

What does EV stand for and what is the interpretation

A

Earned value

As of today, what is the estimated value of the work actually completed?

55
Q

7.4 T&T control cost

What is planned value?

A

The authorized budget assigned to scheduled work

56
Q

Total PV is the what ________

A

Budget at completion also sometimes called performance measurement baseline

BAC. PMB

57
Q

7.4 T&T control cost

What is earned value

A

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

58
Q

EV can never be more than ______

A

PV

59
Q

7.4 T&T control cost

EV
Is the budget for authorized work that has been completed

= planned value (PV) x %percent complete

Needs to be related to the BAC

Includes work done ahead of schedule

Progressive measurement criteria should be establish for each WBS component to measure work in progress

A

.

60
Q

7.4 T&T control cost

What is actual cost

A

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

AC includes the cost of work done ahead of schedule

61
Q

EVM things to remember

For variance (CV and SV)
Positive is _______
Negative is ______

A

Positive is good
negative is bad

-$200 CV or SV Means the project is over budget or behind schedule

62
Q

EVM things to remember

For index (CPI or SPI)

Greater than one is _______

Less than one is ________

A

Greater than one is good
Under budget or ahead of schedule

Less than one is bad
Over budget or behind schedule

63
Q

Note EAC (estimate at completion)

Atypical EAC if cost deviated, but you now expect to complete the remaining work 100% as planned

Typical EAC if the project schedule is a factor impacting the etc and/or the client is insisting you complete the project on schedule

A

.

64
Q

TCPI

What are the two formulas types

A

Original - budget at completion

new approved - estimate at completion

65
Q

TCPI

What is the formula if you need to complete the project in the original budget

A

TCPI = (BAC-EV) / (BAC-AC)

66
Q

TCPI

What formula is used if you developed and got approval of a new cost estimate

A

TCPI = (BAC-EV) / (EAC-AC)

67
Q

7.4 T&T control cost

Earned schedule theory

What are the two formulas

A

Schedule variance equals earn schedule minus actual time

SV = ES - AT

Schedule performance index equals Earned schedule divided by actual time

SPI = ES/AT

68
Q

Cost Summary for exam

To improve accuracy, base estimates on the WBS

Estimating should be done by the person doing the work

Historical information from past projects is most accurate and key to improved estimates

Accuracy of estimates can be increased by eliminating risk or reducing their impacts

Estimates must be kept as realistic and as accurate as possible throughout the life of the project by
re-estimating and reviewing them

Remember, the PM has a professional responsibility to maintain the estimate accuracy for the life of the project

A

.

69
Q

Cost summary for exam Part II

The cost baseline (schedule and scope baseline) should be kept and not changed UNLESS there is an approved change request or the perform in a graded change control process

The cost baseline is the approved version of the budget and includes contingency reserves but excludes management reserves

A

.

PMP With PMI (18 decks)

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