Project+ Study Notes 21

Question 1

is an estimate that is better than expected. ex : monetary costs for building space is lower than expected which is optimistic.

Answer 1

optimistic estimate

Question 2

assumes the goods or services will cost more than expected. ex : work takes longer than expected, obstacles creep up along the way, etc …

Answer 2

pessimistic estimate

Question 3

is the process of aggregating all the cost estimates and establishing a cost baseline for the project. The cost baseline is the total expected cost for the project. Once approved, it’s used throughout the remainder of the project to measure the overall cost performance.

Answer 3

Budgeting

Question 4

Tracking project expenses as they’re incurred is not always the responsibility of the project manager. Once the cost estimates have been provided and the project budget is established, the actual tracking of expenses may be performed by the accounting or finance department. Some organizations use their program management office (PMO) to oversee project budgets, approve expenses, track all the project budgets, and so on.

Answer 4

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Question 5

Project budgets are usually broken down by specific cost categories that are defined by the accounting department. A few examples of common cost categories include salary, hardware, software, travel, training, and materials and supplies. Make certain to obtain a copy of your organization’s cost categories so that you understand how each of your resources should be tracked and classified.

Answer 5

info

Question 6

Most budgets are typically created in a spreadsheet format and may be divided into monthly or quarterly increments or more depending on the size and length of the project.

If you don’t have a template available to start your budget, contact your accounting department to get the chart of accounts information needed to construct the budget. The chart of accounts lists the account number and description for each category of expense you’ll use on the budget.

Answer 6

info

Question 7

is a certain amount of money set aside to cover costs resulting from possible adverse events or unexpected issues on the project. These costs may come about for many reasons, including scope creep, risks, change requests, variances in estimates, cost overruns, and so on. There is no set rule for defining the amount you should put in a contingency fund, but most organizations that use this allocation often set the contingency fund amount as a percentage of the total project cost.

Answer 7

contingency reserve

Question 8

is an amount set aside by upper management to cover future situations that can’t be predicted. As with the contingency reserve, the amount of ??? is typically based on a percentage of the total project cost.

Answer 8

A management reserve

Question 9

is usually under the discretion of the project manager, who controls how these funds are spent. The management fund is usually controlled by upper management, and the project manager can’t spend money out of this fund without approval from upper management. Management reserves are not included as part of the project budget or cost baseline.

Answer 9

contingency fund

Question 10

key members of the project team should review the draft budget. It may be appropriate to have a representative from the accounting department or the PMO review the draft as well. The project team needs to understand the critical link between the schedule and the budget. Any questions about budget categories or how the dollars are spread across the project timeline should be addressed at this time.

Answer 10

Cost Baseline (a)