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PMP > Cost Management Ch 7 > Flashcards

Cost Management Ch 7 Flashcards

1
Q

When is the ability to influence costs greatest in a project?

A

the beginning

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2
Q

What processes are involved in Cost Management?

A

Plan Cost Management

Estimate Cost

Determine Budget

Control Costs

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3
Q

What is Earned Value Management (EVM)?

A

Assesses “how are we doing now” and predicts “how will we do in future”

Uses scope baseline, cost baseline and schedule baseline to form performance measurement baseline

  • PV
  • EV
  • AC
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4
Q

What is Planned Value (PV)?

A

authorized budget assigned to work to be accomplished for an activity or WBS component.

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5
Q

What is Budget At Completed (BAC)?

A

Total of planned value for project

-adding up the planned value for all of the activities

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6
Q

What is Actual Cost (AC)?

A

Actual Cost is the total cost incurred for the actual work completed to date

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7
Q

What is Earned Value (EV)?

A

Earned Value is the value of the work actually completed to date

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8
Q

Define: Plan Cost Management (7.1)

A

establishes the framework/policies/procedures for how to estimate and manage costs

The key benefit of this process is that it provides guidance and direction on how costs are managed from project initiation to closure

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9
Q

What does the Cost Management Plan cover?

A

Units of measure

Level of precision

Level of accuracy

Control thresholds

Reporting formats

Organizational procedures links

Rules of performance measurement

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10
Q

Inputs: Plan Cost Management

A

Project Charter

Project Management Plan:

  • schedule management plan
  • risk management plan

EEFs

OPAs

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11
Q

Tools/Techniques: Plan Cost Management

A

Expert Judgement

Data Analysis (alternatives analysis)

Meetings

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12
Q

What are the some ways to fund a project?

A

self funding

funding with equity (share in exchange for cash investment)

funding with debt (when a company raises money for spending by selling debt)

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13
Q

Outputs: Plan Cost Management

A

Cost Management Plan

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14
Q

What is a Control Threshold?

A

Variance thresholds for monitoring cost performance may be specified to indicate an agreed-upon amount of allowed variation

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15
Q

Define: Estimate Costs (7.2)

A

Process of developing estimates for resources

Key benefit: outlines the $ needed

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16
Q

Inputs: Estimate Costs

A

Project Management Plan

Project Documents

EEFs

OPAs

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17
Q

What are the important components of the Project Management Plan for Estimate Costs?

A

Cost Management Plan

Quality Management Plan

Scope Baseline

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18
Q

Why is the Quality Management Plan important?

A

outlines resources needed to achieve quality

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19
Q

What goes into a Scope Baseline?

A

Project scope statement: (includes funding constraints for the project)

WBS: (provides relationships among all of the project deliverables)

WBS dictionary

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20
Q

Tools/Techniques: Estimate Costs

A

Expert Judgement

Analogous Estimating

Parametric Estimating

Bottom-up Estimating

3 Point Estimating

Data Analysis (alternatives, reserve and cost of quality)

Project Management Information System (PMIS)

Decision Making

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21
Q

What is Reserve Analysis?

A

Accounts for cost uncertainty/identified risks. Viewed as a part of the budget to account for unknowns

22
Q

Outputs: Estimate Costs

A

Cost Estimates

Basis of Estimates

Project Document UPDATES (assumption log, lessons learned register and risk register)

23
Q

What do you need to consider while estimating costs?

A

Basis of estimation

assumptions

constraints

range of possible estimates

confidence level of estimate

24
Q

What are Variable Costs?

A

Costs that change with amount of production/work

E.G. cost of materials, supplies and wages

25
Q

What are Direct Costs?

A

Costs that are directly attributed to the project work

E.G. team travel, team wages, cost of material used on project

26
Q

What are Indirect Costs?

A

Items/costs that can benefit more than one project

E.G. fringe benefits, taxes

27
Q

Define: Determine Budget (7.3)

A

Process of aggregating the estimated costs of individual activities or work packages to create a authorized cost baseline

Key Benefit: determines the cost baseline against which project performance can be controlled and monitored

28
Q

What is a Cost Baseline?

A

Approved budget, excluding management reserves which can only be changed through formal change control procedures

29
Q

Inputs: Determine Budget

A

Project Management Plan (cost management plan, resource management plan and scope baseline)

Project Documents (basis of estimates, cost estimates, project schedule, risk register)

Business Documents (business case and benefits management plan)

Agreement

EEFs

OPAs

30
Q

What is the importance of reviewing the Business Case?

A

Identifies the critical success factors for the project including financial success factors

31
Q

Why is the Benefits Management Plan important at this stage?

A

Includes target benefits (NOV calculations), timeframe for realizing benefits and metrics associated with benefits

32
Q

Tools/Techniques: Determine Budget:

A

Expert Judgement

Cost Aggregation

Data Analysis (management reserves)

Historical Information Review

Funding Limit Reconciliation

Financing

33
Q

What is Cost Aggregation?

A

Total cost estimate for the work packages within all levels of the WBS

34
Q

Outputs: Determine Budget

A

Cost Baseline

Project Funding Requirements

Project Document UPDATES (cost estimate, project schedule and risk register)

35
Q

What do Project Funding Requirements include?

A

total funding and periodic funding (annually, quarterly, etc)

cost baseline plus management reserves

36
Q

Define: Control Costs (7.4)

A

Process of monitoring the status of the project to update project costs and managing changes to the cost baseline
Key benefit: cost baseline is maintained

37
Q

Inputs: Control Costs

A

Project Management Plan (cost management plan, cost baseline, performance measurement baseline)

Project Documents

Project Funding Requirements

Work Performance Data

OPAs

38
Q

When is Performance Measurement Baseline used?

A

when using earned value analysis, the performance measurement baseline is compared to actual results to determine if a change, corrective action or preventative action is needed

39
Q

Tools/Techniques: Control Costs

A

Expert Judgment

Data Analysis: EVA, Variance analysis, Trend analysis, Reserve analysis

To Complete Performance Index (TCPI)

Project Management Information Systems (PMIS)

40
Q

What is Schedule Variance (SV)? How is it calculated?

A

Amount by which project is ahead or behind schedule

SV = EV - PV

41
Q

What is Cost Variance (CV)? How is it calculated?

A

Amount that budget is above or below allocated amount at a given time

CV = EV - AC

42
Q

What is Schedule Performance Index (SPI)? How is it calculated?

A

Measures how efficiently the project team is accomplishing the work

Used in conjunction with CPI to forecast final project completion estimates

SPI = EV / PV

43
Q

What does an SPI above 1.0 indicate?

A

Project is ahead of schedule

44
Q

What is a Cost Performance Index (CPI)? How is it calculated?

A

Measure of cost efficiency of budgeted resources

CPI = EV / AC

45
Q

What does a CPI less than 1.0 indicate?

A

Project is over budget

46
Q

What is Estimate at Completion (EAC)?

A

Expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete

47
Q

What is Estimate to Complete (ETC)?

A

Assuming work is proceeding on plan the cost of completing the remaining authorized work can be calculated using

ETC = EAC - AC

48
Q

What is To-Complete Performance Index (TCPI)?

A

Measure of cost performance that must be met with the remaining resources so to meet the goal within budget

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

49
Q

What does a TCPI greater than 1.0 indicate?

A

harder to complete

50
Q

What is a TCPI of 1.0 indicate?

A

same to complete

51
Q

Outputs: Control Costs

A

Work Performance Information

Cost Forecasts

Change Requests

Project Management Plan UPDATES

Project Document UPDATES

PMP (5 decks)

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