Cost Mgmt Processes

Question 1

Estimate Costs

Answer 1

(7.1 PLAN) Developing an approximation of the monetary resources needed to complete project activities.

Costs are estimated by various methods that are based on past projects, on top-down or bottom-up estimates, or on averaging between pessimistic, neutral or optimistic assumptions. This gives you an estimate or ballpark figure of the project costs.

Question 2

Determine Budget

Answer 2

(7.2 PLAN) Sums up the estimated costs and add reserves to establish an authorized cost baseline.

Here, in a parallel to 6.5 Determine Schedule, once you have the work packages broken down into billable units of work called activities, you can now start adding them up to get the project baseline. Add the reserves for those risks which you’ve planned for (contingency reserves) and you get the cost baseline. Finally add the reserves for those risks which you’ve NOT planned for (management reserves) and you get the cost budget.

Question 3

Control Costs

Answer 3

(7.3 M&C) Monitoring the status of the project to update project budget and manage changes to the cost baseline.

Here you use the tools such as earned value to find out whether your project is proceeding according to plan or not. This gives you a precise basis for recommending what to do to get it back on track.