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PMP > Cost Management > Flashcards

Cost Management Flashcards

1
Q

cost management

A

includes processes to plan and control project spending on resources needed to complete the project work

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2
Q

cost management

- processes

A
  • plan cost management (planning)
  • estimate costs (planning)
  • determine budget (planning)
  • control costs (monitoring and controlling)
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3
Q

plan cost management

A

the process of documenting how the project budget will be planned and controlled. this helps to ensure all individuals of the project management team are using the same approach and tools for cost management.

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4
Q

plan cost management

- key inputs

A
  • project charter
  • project management plan
    • schedule management plan
    • risk management
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5
Q

plan cost management

- key outputs

A
  • cost management plan
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6
Q

cost management plan

A

defined how the project budget will be planned, approved, and controlled through a series of project management processes. this may describe the tools to be used, the participating stakeholders, and the frequency of iteration, further, it may establish thresholds for planning accuracy, variance limits (thresholds for escalation), and rules for performance measurement and reporting.

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7
Q

estimate costs

A

the process of making estimates of the costs for each scheduled activity. this should also include documentation on what assumptions have been made and what spending alternatives exist.

this process should be performed iteratively to make estimates more precise. the first iteration may develop a Rough Order of Magnitude (ROM) estimate in the range of -25% to +75%, while a second iteration may develop a Definitive Estimate in the range of -5% to +10%

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8
Q

estimate costs

- key inputs

A
  • project documents
    • lessons learned register
    • project schedule
    • resources requirements
    • risk register
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9
Q

estimate costs

- key tools and techniques

A
  • analogous estimating
  • parametric estimating
  • three point estimating
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10
Q

estimate costs

- key outputs

A
  • cost estimates

- basis of estimates

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11
Q

analogous estimating

A

the use of actual data from a similar project as a basis for predicting durations for future cost estimates.

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12
Q

parametric estimating

A

the use of a mathematical equation to estimate the total cost of an activity based on known quantity and rate information

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13
Q

bottom-up estimating

A

uses individual cost estimated for the smallest level of detail and aggregates them up to the higher levels.

is a technique to break each schedule activity into more detail for the purposes of estimating, then rolling the components back up to the activity level. this is similar to decomposition

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14
Q

three-point estimating

A

is the use of averaging three different estimates (most likely, optimistic, pessimistic) to estimate the cost of a project activity

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15
Q

alternative analysis

A

a technique to evaluate the spending or resource options and tradeoffs that are available to perform project work

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16
Q

reserve analysis

A

a technique used to counteract risk by adding a buffer into the cost estimate. contingency reserve can be added at the activity level based on identified risk

used to monitor contingency and management reserved. if it is evident that a risk event will not occur, the associated contingency reserve may be removed from the cost baseline. if unidentified risk events occur, affecting cost performance, the project management team may make a formal request to have the management reserves added to the baseline

a technique to compare remaining cost or time “buffer” with the remaining risks in the project

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17
Q

cost of quality (COQ)

A

a technique used to evaluate all of the costs that will be incurred to ensure desired deliverable quality

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18
Q

cost estimates

A

quantitative data representing expected resource (people, equipment, facilities, and materials) costs for each schedule activity

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19
Q

basis of estimates

A

documentation stating how the estimates were generated, assumptions, constraints, and anticipated variances.

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20
Q

determine budget

A

the process of taking the individual cost estimates and working with key stakeholders to generate an overall project cost baseline

the cost baseline represents an authorized time-phased spending plan for all the project scope (work). it does not include management reserves that are addressed in the project budget.

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21
Q

determine budget

- key tools and techniques

A
  • cost aggregation

- funding limit reconciliation

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22
Q

determine budget

- key outputs

A
  • cost baseline

- project funding requirements

23
Q

cost aggregation

A

the summation of activity cost estimates for each top-level summary. this is done to determine an estimate for the entire project

24
Q

historical information review

A

may use a combination of organizational process assets (lessons learned), analogous estimating, and parametric estimating, to develop a model to help estimate project costs.

25
Q

funding limit reconciliation

A

comparison between the planned project spending and commitment of funds by the project sponsor the project team must reconcile both budget totals as well as the schedule of spending

26
Q

financing

A

includes acquiring resources to fund the project. the project team may play a role in this process, especially to ensure external funders’ requirements are fulfilled.

27
Q

cost baseline

A

an approved time-phased spending plan for how much and when project assets are authorized to be spent. this may inherently include contingency reserves that have been allocated to identified risks at the activity level. this may not be the total budget if management reserves exist. the cost baseline is the primary reference for cost performance measurement.

baseline = plan + approved changes

28
Q

project funding requirements

A

total funds (project budget) required to include the cost baseline plus any management reserves that have been allocated for unidentified risks outside of the baseline.

29
Q

control costs

A

the process of proactively comparing actual project execution to the approved plan to document the performance of the project and influence factors that can bring future project performance closer in line with the plan. one popular technique is the earned value technique.

in this process, the project management team observes the cost of project work as compared to the approved plan to determine performance. when a variance exists, corrective and preventative change requests should be generated to help bring future results closer in line with approved plans.

30
Q

control costs

- key inputs

A
  • project management plan
    • cost management plan
    • cost baseline
    • performance measurement plan
  • work performance data
31
Q

control costs

- key tools and techniques

A
  • data analysis
    • earned value analysis
    • variance analysis
    • trend analysis
    • reserve analysis
32
Q

control costs

- key outputs

A
  • work performance information
  • cost forecasts
  • change requests
33
Q

work performance data (WPD)

A

represents the status of actual schedule progress or actual costs to date. it is generated as an output of the direct and manage project work process. information may include the status of deliverables, reported percent of work physically completed, and start/finish dates of scheduled activities.

information on the status of activities being performed to accomplish project work

collected information on performance such as schedule progress deliverable status, and budget spent (an output of direct and manage work)

34
Q

earned value management

A

a technique used to measure schedule and cost performance and make predictions about future performance. by understanding the value of work that should be done, the value of work that is done, and the value of actual costs, project teams can measure performance relative to approved baselines to help the monitoring and controlling of future project execution. this technique should be applied to each schedule activity or work package.

35
Q

variance analysis

A

the technique of comparing actual costs for work completed with the project costs of that work in the cost baseline to detect variations. cost variations should be used to determine if corrective action is needed. this may include trend analysis and earned value management.

36
Q

reserve analysis

A

used to monitor contingency and management reserved. if it is evident that a risk event will not occur, the associated contingency reserve may be removed from the cost baseline. if unidentified risk events occur, affecting cost performance, the project management team may make a formal request to have the management reserves added to the baseline

a technique used to counteract risk by adding a buffer into the cost estimate. contingency reserve can be added at the activity level based on identified risk

a technique to compare remaining cost or time “buffer” with the remaining risks in the project

37
Q

cost forecasts

A

the documented predictions of future project performance and results, typically based on past project performance. Earned Value Measurement concepts can be used as the basis of estimating future cost performance

38
Q

to-complete performance index (TCPI)

A

a calculation used to determine the cost performance that needs to be achieved in order to complete the work remaining within a management goal such as Budget at Completion (BAC)

39
Q

project management information system

A

helps automate the generation of a schedule mode based on information such as durations and dependencies. scheduling tools are typically computer-based software applications

may be used to help automate the tracking and reporting of earned value measurements

40
Q

budget at completion (BAC)

A

the estimated total cost of all project work as documented in the cost baseline

= known

41
Q

planned percent complete

A

the percentage of work that should be complete based on a given date, derived from the schedule baseline

42
Q

planned value (PV)

A

the planned cost of scheduled work to date.

= planned percent complete * budget at completion (BAC)

43
Q

actual percent complete

A

the percentage of work completed based on a given date, derived from work performance data.

44
Q

actual cost (AC)

A

the total cost of work to data, derived from work performance data

= known

45
Q

earned value (EV)

A

the estimated cost of work actually completed to date

= actual percent complete * budget at completion (BAC)

46
Q

schedule variance (SV)

A

difference between work completed and what was planned to be completed

= EV - PV
= Earned Value - Planned Value

47
Q

Cost Variance (CV)

A

difference between the value of work completed and actual spending to date

= EV - AC
= Earned Value - Actual Cost

48
Q

cost performance index (CPI)

A

measures the cost efficiency for a time period. values greater than 1.0 indicate cost underruns (good)

= EV / AC
= Earned Value / Actual Cost

49
Q

schedule performance index (SPI)

A

measure schedule efficiency for a time period. values greater than 1.0 indicated performance ahead of schedule (good)

= EV / PV
= Earned Value / Planned Value

50
Q

estimate at completion (EAC)

A

forecasts total project spending based on the current rate of cost performance

= BAC / CPI
= Budget at completion / cost performance index

51
Q

estimate to completion (ETC)

A

forecasts remaining project costs based on the current rate of cost performance

= EAC - AC
= estimate at completion - actual cost

52
Q

variance at completion (VAC)

A

represents the difference between the original project budget and forecasted total project spending

= BAC - EAC
= budget at completion - estimate at completion

53
Q

to-complete performance index (TCPI)

A

a calculation used to determine the cost performance rate that needs to be achieved to complete the work remaining within a management goal

= (original budget - earned value) / (basline - actual cost)
= (BAC - EV) / (BAC - AC)

PMP (11 decks)

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