PMBOK Chapter 7 - Project Cost Management

Question 1

<p>Project Cost Management (knowledge area)</p>

Answer 1

<p>includes the processes involved managing the costs so that the project can be completed within the approved budget</p>

Question 2

<p>Plan Cost Management (process)</p>

Answer 2

<p>the process that establishes the policies, procedures, and documentation for managing and controlling project costs</p>

Question 3

<p>Estimate costs (process)</p>

Answer 3

<p>the process of developing an approximation of the monetary resources needed to complete project activities</p>

Question 4

<p>Determine Budget (process)</p>

Answer 4

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

Question 5

<p>Control Costs (process)</p>

Answer 5

<p>the process of monitoring the status of the project to update the project costs and managing changes to the cost baseline</p>

Question 6

<p>What is the cost management plan?</p>

Answer 6

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

Question 7

<p>What is the human resource management plan?</p>

Answer 7

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

Question 8

<p>What is the Cost of Quality (COQ)?</p>

Answer 8

<p>assumptions about costs of quality may be used to prepare the activity cost estimate</p>

Question 9

<p>What is Vendor Bid Analysis?</p>

Answer 9

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

Question 10

<p>What are Activity Cost Estimates?</p>

Answer 10

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

Question 11

<p>What is the Basis of Estimates?</p>

Answer 11

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

Question 12

<p>What is cost aggregation?</p>

Answer 12

<p>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</p>

Question 13

<p>What are historical relationships?</p>

Answer 13

<p>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</p>

Question 14

<p>What is a funding limit reconciliation?</p>

Answer 14

<p>the expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project</p>

Question 15

<p>What is a cost baseline?</p>

Answer 15

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

Question 16

<p>What are project funding requirements?</p>

Answer 16

<p>total funding requirements and periodic funding requirements are derived from the cost baseline</p>

Question 17

<p>What is Earned Value Management (EVM)?</p>

Answer 17

<p>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</p>

Question 18

<p>What is Planned Value (PV)?</p>

Answer 18

<p>the authorized budget assigned to scheduled work</p>

Question 19

<p>What is Earned Value (EV)?</p>

Answer 19

<p>a measure of work performed expressed in terms of the budget authorized for that work</p>

Question 20

<p>What is Actual Cost (AC)?</p>

Answer 20

<p>the realized cost incurred for the work performed on an activity during a specific time period</p>

Question 21

<p>What is Schedule Variance (SV)?</p>

Answer 21

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

SV = EV - PV</p>

Question 22

<p>What is Cost Variance (CV)?</p>

Answer 22

<p>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</p>

Question 23

<p>What is Schedule Performance Index (SPI)?</p>

Answer 23

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

SPI = EV / PV</p>

Question 24

<p>What is Cost Performance Index (CPI)?</p>

Answer 24

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

CPI = EV / AC</p>

Question 25

<p>What is forecasting?</p>

Answer 25

<p>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</p>

Question 26

<p>Three common ways to develop EACs:</p>

Answer 26

<p>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)]</p>

Question 27

<p>What is To-Complete-Performance-Index (TCPI)?</p>

Answer 27

<p>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)</p>

Question 28

<p>ITTO's for Plan Cost Management</p>

Answer 28

<p>Inputs: (Project Charter, OPA, Project Management Plan, EEF)
TT: (Expert Judgment, Data Analysis, Meeting)
Output: (Cost Management Plan)</p>

Question 29

<p>ITTO's for Estimate Cost</p>

Answer 29

<p>Inputs: (Project Management Plan, EEF, OPA, Project Documents)
TT: (Analogous Estimating, Parametric Estimating, Expert Judgement, Bottom-Up Estimating, Three-Point Estimate)
Output: (Estimate Cost)</p>

Question 30

<p>Level of Cost Estimating Accuracy</p>

Answer 30

<p>1. ROM - Rought Order of Magnitude (-25% to +75%)

2. Budget Estimate - (Must have Scope) (-10% to +25%)
3. Definitive Estimate (Bottom Up Estimate) (-5% to +10%)</p>

Question 31

<p>Types of Cost</p>

Answer 31

<p>1. Direct Cost

2. Indirect Cost
3. Variable Cost
4. Fixed Cost</p>

Question 32

<p>ITTO's for Budget Estimate</p>

Answer 32

<p>Inputs: (Project Management Plan, EEF, OPA, Project Documents, Business Documents, Project Schedule, Agreements)
TT: (Cost Aggregation, Data Analysis, Historical Information, Funding Limit Reconciliation, Financing)
Output: (Determine Budget, Cost Baseline, Project Funding Requirements, Update Project Management Plan)</p>

Question 33

Processes in Project Cost Management

Answer 33

1. Plan Cost Management
2. Estimate Cost
3. Determine Budget
4. Cost Control

Question 34

ITTO’s for Cost Control

Answer 34

Inputs: (Project Management Plan, EEF, OPA, Project Documents, Business Documents, Project Funding Requirements, WP Data)
TT: (Data Analysis, Expert Judgement, To Complete Performance Index)
Output: (Cost Forecast, Work Performance Information, Change Request Project Document Updates, Update Project Management Plan)