Cost Terminology Flashcards
Actual Cost (AC)
Represents the total costs that have actually been accrued up to a particular point in time; also known as actual cost of work performed
Analogous Estimates (Technique)
Process of using a previous project of similar characteristic (size, cost, scope) to estimate a new project
Baseline
Estimate/plan that the project tries to achieve (cost, scope, time, etc.)
Bottom-Up Estimating
A detailed estimating approach that usually involves team input- As the team builds the pieces of the estimate, they build the total estimate from the bottom up.
Budget
The total amount of money expected to be spent on a project based on the original cost estimates plus any approved changes
Budget at Completion (BAC)
Total project budget; amount of money planned to be spent by the time the project is complete; sum of all planned value (PV)
Budgetary Estimate
An estimate used to put money into a company’s (or project’s) budget
Chart of Accounts (Tool)
A structure used to monitor project cost that usually aligns with a company’s accounting system and WBS of the project or program
Code of Accounts (Tool)
A numbering system used in project management to identify pieces of the work breakdown structure
Control Account (Tool)
A point where scope, time, budgeted cost, and actual cost come together to measure performance on a project - The control account is used at multiple interface points on the project.
Control Costs
The process of controlling changes to the budget and monitoring project spending
Cost Management Plan
The document that explains how to handle cost estimations, budgeting , variances, and other cost-related items on the project
Cost Performance Baseline
A budget version for a specific time period that is used as the basis for expenditure comparison
Cost Performance Index (CPI)
A ratio that shows the current efficiency of money being spent on the project; Formula: EV/AC - A value of one means you are getting out what you put in (which is good); less than one is bad; greater than one is good.
Cost Variance (CV)
The difference between what has been built (EV) and what the cost was to build it (AC); Formula: EV-AC -A value of zero (0) means the project is creating what it should for the cost as planned . A negative value means you are over budget; a positive value means you are under budget.
Definitive Estimate
A cost estimate that provides the accurate estimation of the project cost; the final estimate to be used on the project before implementation begins; Tolerance range: -10 to +10%
Determine Budget
The process of applying the overall cost estimates to the individual work elements to allow for a baseline cost measurement
Direct Cost
Cost that is directly applicable to the project (Ex: test computer for software being created on the project, IC chips, or labor used on the project)
Earned Value (EV)
Represents the value of the work that has actually been accomplished or completed up to a particular point in time; the percent complete of each activity multiplied by the planned value; also known as budgeted cost of work performed (BCWP)
Earned Value Management (EVM)
Earned value management technique that factors in cost (AC) and time (PV) along with what has actually been accomplished (EV) to show the state of the project; produces a quantifiable status of the project instead of a “gut feel” estimate which can be inaccurate and inconsistent
Earned Value Technique (EVT) (Technique)
The technique associated with measuring the amount of completion of a work breakdown structure component, control account or project
Estimate at Completion (EAC)
Represents the projected total estimate, based on the current efficiency (CPI) with which you are spending money on the project; One version of the formula: BAC/CPI
Estimate Costs
The process of estimating (educated consistent process) the cost of people and other resources to complete the project activities
Estimate to Complete (ETC)
Represents the projected total estimate remaining to be spent, based on the current efficiency (CPI) with which you are spending money on the project; Formula : EAC-AC
Indirect Cost
Cost that is not directly accrued on the project (Ex: electricity, taxes, rent)
Internal Rate of Return (IRR)
A project comparison value; represents the discounted rate that zeroes out the net present value (NPV)
Learning Curve Theory
A theory which states that the more of something that is produced, the lower the unit cost of it becomes due to an improvement in efficiency
Life Cycle Costing
Consideration of not just project cost, but total ownership (operations and support) cost of the item created by the project
Management Reserves
Money set aside to account for unpredictable items (unknown unknowns)
Net Present Value (NPV)
A value used in capital budgeting , in which the present value of cash inflow is subtracted from the present value of cash outflows; compares the value of a dollar today versus the value of that same dollar in the future, after taking inflation and return into account
Opportunity Cost
The cost associated with giving up one opportunity for another (Ex: Project A $50K, Project B $75K. If you select Project B, it has an opportunity cost of the total of Project A, which is $50K.)
Parametric Modeling
Application of a mathematical model used to estimate project components (time, cost, scope) by having other variables entered into the application
Planned Value (PV)
Represents the total costs that should have been spent up to a particular point in time; also known as budgeted cost of work scheduled (BCWS)
Profit
Money made after expenses have been subtracted from revenue
Profit Margin
Ratio between revenues and profit on a project, product, or initiative
Project Cost Management
Processes used to complete the project within the approved budget
Reserves
Money set aside in a budget used for items that are difficult to predict; also known as contingency reserves
Rough Order of Magnitude (ROM) Estimate
Very early cost estimate used to give a rough estimate of what the project will cost to complete: Tolerance range: -50% to +50%.
Schedule Performance Index (SIP)
Ratio of earned value and planned value that can be used to calculate how a project is progressing
Schedule Variance (SV)
The difference between what has been built (EV) and the time it should take to build it (PV); Formula: EV-PV- A value of zero (0) means the project is creating what it should in the planned timeframe. A negative value means that it is taking longer than planned on the project to complete activities.
S-Curve
Graphic representation of costs, work, and other quantities over time so that the planned value, earned value, and actual cost of the work can be seen
Sunk Cost
Money that has already been spent on a project; should not be considered when selecting or evaluating a project
Tangible Cost/Benefit
Easily measurable cost or benefit of a project; measured in dollars
To-Complete-Performance Index (TCPI)
The ratio of remaining work to remaining funds.
