PMBOK Chapter 7 - Project Cost Management

Question 1

Project Cost Management (knowledge area)

Answer 1

includes the processes involved managing the costs so that the project can be completed within the approved budget

Question 2

Plan Cost Management (process)

Answer 2

the process that establishes the policies, procedures, and documentation for managing and controlling project costs

Question 3

Estimate costs (process)

Answer 3

the process of developing an approximation of the monetary resources needed to complete project activities

Question 4

Determine Budget (process)

Answer 4

the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline

Question 5

Control Costs (process)

Answer 5

the process of monitoring the status of the project to update the project costs and managing changes to the cost baseline

Question 6

What is the cost management plan?

Answer 6

component of the project management plan and describes how the project costs will be planned, structured, and controlled.

Question 7

What is the human resource management plan?

Answer 7

provides project staffing attributes, personnel rates and related rewards/recognition which are necessary components for developing the project cost estimates

Question 8

What is the Cost of Quality (COQ)?

Answer 8

assumptions about costs of quality may be used to prepare the activity cost estimate

Question 9

What is Vendor Bid Analysis?

Answer 9

cost estimating methods may include analysis of what the project should cost, based on the responsive bids from qualified vendors

Question 10

What are Activity Cost Estimates?

Answer 10

quantitative assessments of the probable costs required to complete project work, can be in summary form or in detail

Question 11

What is the Basis of Estimates?

Answer 11

supporting documentation that should provide a clear and complete understanding of how the cost estimate was delivered

Question 12

What is cost aggregation?

Answer 12

cost estimates are aggregated by work packages in accordance with the WBS, the work package cost estimates are then aggregated for the higher component levels of the WBS and ultimately for the entire project

Question 13

What are historical relationships?

Answer 13

any historical relationships that result in parametric estimates or analogous estimates involve the use of project characteristics to develop mathematical models to predict total project costs

Question 14

What is a funding limit reconciliation?

Answer 14

the expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project

Question 15

What is a cost baseline?

Answer 15

the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures

Question 16

What are project funding requirements?

Answer 16

total funding requirements and periodic funding requirements are derived from the cost baseline

Question 17

What is Earned Value Management (EVM)?

Answer 17

methodology that combines scope, schedule and resource measurements to assess project performance and progress. It integrates the three baselines to create the performance measurement baseline

Question 18

What is Planned Value (PV)?

Answer 18

the authorized budget assigned to scheduled work

Question 19

What is Earned Value (EV)?

Answer 19

a measure of work performed expressed in terms of the budget authorized for that work

Question 20

What is Actual Cost (AC)?

Answer 20

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

Question 21

What is Schedule Variance (SV)?

Answer 21

a measure of schedule performance expressed as the difference between the earned value and the planned value

SV = EV - PV

Question 22

What is Cost Variance (CV)?

Answer 22

the amount of budget deficit or surplus at a given point in time; expressed as the difference between earned value and actual cost

CV = EV - AC

Question 23

What is Schedule Performance Index (SPI)?

Answer 23

a measure of schedule efficiency expressed as the ratio of earned value to planned value

SPI = EV / PV

Question 24

What is Cost Performance Index (CPI)?

Answer 24

a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost

CPI = EV / AC

Question 25

What is forecasting?

Answer 25

the project team may develop a forecast for the estimate at completion (EAC) that may differ from the budget at completion (BAC) based on the project performance

Question 26

Three common ways to develop EACs:

Answer 26

1) EAC forecast for ETC work performed at the budgeted rate: EAC = AC + (BAC - EV)
2) EAC forecast for ETC work performed at the present CPI: EAC = BAC / CPI
3) EAC forecast for ETC work considering both SPI and CPI factors: EAC = AC + [(BAC - EV) / ( CPI * SPI)]

Question 27

What is To-Complete-Performance-Index (TCPI)?

Answer 27

a measure of the cost performance that is required to be achieved with the remaining resources in order to meet a specified management goal, expressed as a ratio of the cost to finish the outstanding work to the remaining budget.

TCPI based on the BAC: TCPI = (BAC - EV) / (BAC - AC)
TCPI based on the EAC: TCPI = (BAC - EV ) / (EAC - AC)