Project Cost Management

Question 1

Actual cost (AC)

Answer 1

udemy- The actual amount of monies the project
has spent to date.

pmbok- Actual cost is the realized cost incurred for the work performed on an activity during a specific time period.

Question 2

Analogous estimating

Answer 2

udemy- An approach that relies on historical information to predict the cost of the current project. It is also known as top-down estimating and is the least reliable of all the cost-estimating approaches.

pmbok- a technique for estimating the duration or cost of an activity or a project using historical data from a similar activity or project.

Question 3

Bottom-up estimating

Answer 3

udemy- An estimating approach that starts from zero, accounts for each component of the WBS, and arrives at a sum for the project. It is completed with the project
team and can be one of the most time-consuming and most reliable methods to
predict project costs.

pmbok- Bottom-up estimating is a method a component of work

Question 4

Budget estimate

Answer 4

udemy- This estimate is also somewhat broad and is used early in the planning
processes and also in top-down estimates. The range of variance for the
estimate can be from –10 percent to +25 percent.

Question 5

Commercial database

Answer 5

udemy- A cost-estimating approach that uses a database, typically software-driven, to create the cost estimate for a project.

Question 6

Contingency reserve

Answer 6

udemy- A contingency allowance to account for overruns in costs. Contingency
allowances are used at the project manager’s discretion and with management’s approval to counteract cost overruns for scheduled activities and risk events.

pmbok- Contingency reserves are the budget within the cost baseline that is allocated for identified risks. Contigency reserves are often viewed as the part of the budget intended to address the known-unknowns that can affect a project.

Question 7

Cost aggregation

Answer 7

udemy- Costs are parallel to each WBS work package. The costs of each work
package are aggregated to their corresponding control accounts. Each
control account then is aggregated to the sum of the project costs.

pmbok- Summing the lower-level cost estimates associated with the various work packages for a given level within the project’s WBS or for a given cost control account.

Question 8

Cost baseline

Answer 8

udemy- A time-lapse exposure of when the project monies are to be spent in relation to cumulative values of the work completed in the project.

pmbok- The approved version of the time-phased project budget, excluding any management reserves, which can be changed only through formal change control procedures and is used as basis for comparison to actual results.

Question 9

Cost budgeting

Answer 9

The cost aggregation achieved by assigning specific dollar amounts for each of the scheduled activities or, more likely, for each of the work packages in the WBS. Cost budgeting applies the cost estimates over time.

Question 10

Cost change control system

Answer 10

A system that examines any changes associated with scope changes, the cost of materials, and the cost of any other resources, and the associated impact on
the overall project cost.

Question 11

Cost management plan (follow up with udemy on this)

Answer 11

The cost management plan dictates how cost variances will be managed.

Question 12

Cost of poor quality

Answer 12

The monies spent to recover from not adhering to the expected level of quality. Examples may include rework, defect repair, loss of life or limb because safety precautions were not taken, loss of sales, and loss of customers. This is also known as the cost of nonconformance to quality.

Question 13

Cost of quality

Answer 13

udemy- The monies spent to attain the expected level of quality within a project. Examples include training, testing, and safety precautions.

pmbok- All costs incurred over the life of the product by investment in preventing nonconformance to requirements, appraisal of the product or service for conformance to requirements, and failure to meet requirements.

Question 14

Cost performance index (CPI)

Answer 14

udemy- Measures the project based on its financial performance. The formula is CPI
= EV/AC.

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

Question 15

Cost variance (CV)

Answer 15

udemy- The difference of the earned value amount and the cumulative actual costs
of the project. The formula is CV = EV – AC.

pmbok- the amount of budget deficit or surplus at a given point in time, expressed as the diffrence between earned value and the actual cost

Question 16

Definitive estimate

Answer 16

udemy- This estimate type is one of the most accurate. It’s used late in the planning
processes and is associated with bottom-up estimating. You need the WBS in order to create the definitive estimate. The range of variance for the estimate can be from –5 percent to +10 percent.

Question 17

Direct costs

Answer 17

Costs are attributed directly to the project work and cannot be shared among projects (for example, airfare, hotels, long-distance phone charges, and so on).

Question 18

Earned value (EV)

Answer 18

udemy- Earned value is the physical work completed to date and the authorized budget for that work. It is the percentage of the BAC that represents the actual work completed in the project.

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

Question 19

Estimate at completion (EAC)

Answer 19

udemy- These forecasting formulas predict the likely completed costs of the project
based on current scenarios within the project.

PMBOK- The expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete.

Question 20

Estimate to complete (ETC)

Answer 20

udemy- An earned value management formula that predicts how much funding the
project will require to be completed. Three variations of this formula are based on conditions the project may be experiencing.

PMBOK- The expected cost to finish all the remaining project work.

Question 21

Fixed costs

Answer 21

Costs that remain constant throughout the life of the project (the cost of a piece of rented equipment for the project, the cost of a consultant brought on to the
project, and so on).

Question 22

Funding limit reconciliation

Answer 22

udemy- An organization’s approach to managing cash flow against the project deliverables based on a schedule, milestone accomplishment, or data constraints.

pmbok- the process of comparing the planned expenditure of project funds against any limits on the commitment of funds for the project to identify any variances between the funding limits and the planned expenditures.

Question 23

Indirect costs

Answer 23

Costs that are representative of more than one project (for example, utilities for the performing organization, access to a training room, project management
software license, and so on).

Question 24

Known unknown

Answer 24

An event that will likely happen within the project, but when it will happen and to what degree is unknown. These events, such as delays, are usually risk-related.

Question 25

Learning curve

Answer 25

An approach that assumes the cost per unit decreases the more units workers complete, because workers learn as they complete the required work.

Question 26

Oligopoly

Answer 26

udemy- A market condition where the market is so tight that the actions of one vendor affect the actions of all the others.

Question 27

Opportunity cost

Answer 27

The total cost of the opportunity that is refused to realize an opposing opportunity.

Question 28

Parametric estimating

Answer 28

udemy- An approach using a parametric model to extrapolate what costs will be needed for a project (for example, cost per hour and cost per unit). It can include variables and points based on conditions. PMBOK- estimating technique in which an algorithm is used to calculate cost or duration based on historical data and project parameters.

Question 29

Planned value (PV)

Answer 29

udemy- Planned value is the work scheduled and the budget authorized to accomplish that work. It is the percentage of the BAC that reflects where the project should be at this point in time. pmbok- The authorized budget assigned to scheduled work. It is the authorized budget planned for the work to be accomplished for an activity or work breakdown structure (WBS) component, not including management reserve.

Question 30

Project variance

Answer 30

The final variance, which is discovered only at the project’s completion. The formula is VAR = BAC – AC.

Question 31

Regression analysis

Answer 31

udemy- This is a statistical approach to predicting what future values may be, based on historical values. Regression analysis creates quantitative predictions based on variables within one value to predict variables in another. This form of estimating relies solely on pure statistical math to reveal relationships between variables and to predict future values. PMBOK- An analytical technique where a series of input variables are examined in relation to their corresponding output results in order to develop a mathematical or statistical relationship.

Question 32

Reserve analysis

Answer 32

udemy- Cost reserves are for unknown unknowns within a project. The management reserve is not part of the project cost baseline, but is included as part of the project budget. PMBOK- used to monitor the status of contingency and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested.

Question 33

Rough order of magnitude

Answer 33

This rough estimate is used during the initiating processes and in top-down estimates. The range of variance for the estimate can be from –25 percent to +75 percent.

Question 34

Schedule performance index (SPI)

Answer 34

udemy- Measures the project based on its schedule performance. The formula is SPI = EV/PV. PMBOK- a measure of schedule efficiency expressed as the ratio of earned value to planned value. It measures how efficiently the project team is accomplishing the work.

Question 35

Schedule variance (SV)

Answer 35

udemy- The difference between the earned value and the planned value. The formulas is SV = EV – PV. PMBOK- a measure of schedule performance expressed as the difference between the earned value and the planned value. It is the amount of by which the project is ahead or behind the planned delivery date, at a given point in time. It is a measure of schedule performance on a project.

Question 36

Single source

Answer 36

Many vendors can provide what your project needs to purchase, but you prefer to work with a specific vendor.

Question 37

Sole source

Answer 37

udemy- Only one vendor can provide what your project needs to purchase. Examples include a specific consultant, specialized service, or unique type of mate PMBOK- The buyer asks a specific seller to prepare technical and financial proposals, which are then negotiated. Since there is no competition, this method is acceptable only when properly justified and should be viewed as an expectation.

Question 38

Sunk costs

Answer 38

Monies that have already been invested in a project.

Question 39

To-Complete Performance Index

Answer 39

udemy- A formula to forecast the likelihood of a project to achieve its goals based on what’s happening in the project right now. There are two different flavors for the TCPI, depending on what you want to accomplish. If you want to see if your project can meet the budget at completion, you’ll use this formula: TCPI = (BAC – EV)/(BAC – AC). If you want to see if your project can meet the newly created estimate at completion, you’ll use this version of the formula: TCPI = (BAC – EV)/(EAC – AC). PMBOK- 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 the ratio of the cost to finish the outstanding work to the remaining budget.

Question 40

Variable costs

Answer 40

udemy- Costs that change based on the conditions applied in the project (the number of meeting participants, the supply of and demand for materials, and so on).

Question 41

Variance

Answer 41

udemy- The difference between what was expected and what was experienced. PMBOK- A quantifiable deviation, departure, or divergence away from a known baseline or expected value.

Question 42

Variance at completion (VAC)

Answer 42

udemy- A forecasting formula that predicts how much of a variance the project will likely have based on current conditions within the project. The formula is VAC = BAC –EAC. PMBOK- A projection of the amount of budget deficit or surplus, expressed as the difference between the budget at completion and the estimate at completion.