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Glossary > Project Cost Management > Flashcards

Project Cost Management Flashcards

1
Q

Actual Cost (AC)

A

The actual amount of monies the project

has spent to date.

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2
Q

Analogous Estimating

A 
An approach that relies on historical
information to predict the cost of the
current project. It is also known as topdown
estimating and is the least reliable
of all the cost-estimating approaches.
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3
Q

Bottom-Up Estimating

A

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 timeconsuming
and most reliable methods to
predict project costs.

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4
Q

Budget Estimate

A 
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.
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5
Q

Commercial Database

A

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

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6
Q

Contingency Reserve

A 
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.
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7
Q

Cost Aggregation

A 
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.
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8
Q

Cost Baseline

A

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.

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9
Q

Cost Budgeting

A 
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.
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10
Q

Cost Change Control System

A 
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.
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11
Q

Cost Management Plan

A

The cost management plan dictates how

cost variances will be managed.

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12
Q

Cost of Poor Quality

A

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.

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13
Q

Cost of Quality

A

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

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14
Q

Cost Performance Index (CPI)

A

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

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15
Q

Cost Variance (CV)

A

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

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16
Q

Definitive Estimate

A 
This estimate type is one of the most
accurate. It’s used late in the planning
processes and is associated with bottomup
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.
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17
Q

Direct Costs

A

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).

18
Q

Earned Value (EV)

A 
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.
19
Q

Estimate at Completion (EAC)

A

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

20
Q

Estimate to Complete (ETC)

A 
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.
21
Q

Fixed Costs

A 
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).
22
Q

Funding Limit Reconciliation

A

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

23
Q

Indirect Costs

A 
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).
24
Q

Known Unknown

A

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.

25
Q

Learning Curve

A

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

26
Q

Oligopoly

A

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

27
Q

Opportunity Cost

A

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

28
Q

Parametric Estimating

A 
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.
29
Q

Planned Value

A 
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.
30
Q

Project Variance

A

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

31
Q

Regression Analysis

A

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.

32
Q

Reserve Analysis

A 
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.
33
Q

Rough Order of Magnitude

A 
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.
34
Q

Schedule Performance Index (SPI)

A

Measures the project based on its
schedule performance. The formula is
SPI = EV/PV.

35
Q

Schedule Variance (SV)

A

The difference between the earned value
and the planned value. The formulas is
SV = EV – PV.

36
Q

Single Source

A

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

37
Q

Sole Source

A

Only one vendor can provide what your
project needs to purchase. Examples
include a specific consultant, specialized
service, or unique type of material.

38
Q

Sunk Costs

A

Monies that have already been invested

in a project.

39
Q

To-Complete Performance Index

A

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).

40
Q

Variable Costs

A

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).

41
Q

Variance

A

The difference between what was expected and what was experienced.

42
Q

Variance at Completion (VAC)

A

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.

Glossary (8 decks)

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