week 10_Cost Management Flashcards
What is the importance of project cost management?
IT projects have a poor track record for meeting budget goals.
What is a cost overrun?
The additional percentage or dollar amount by which actual costs exceed estimates.
What does project cost management include?
The processes required to ensure that the project is completed within an approved budget.
What are the four main processes in project cost management?
- Planning cost management
- Estimating costs
- Determining the budget
- Controlling costs
Define ‘cost’ in the context of project management.
A resource sacrificed or foregone to achieve a specific objective.
What is the formula for profit?
Profits = Revenues - Expenditures.
What does life cycle costing consider?
The total cost of ownership, including development and support costs.
Differentiate between tangible and intangible costs.
- Tangible costs: Easily measurable in dollars.
- Intangible costs: Difficult to measure in monetary terms.
What are direct costs?
Costs that can be directly related to producing the products and services of the project.
What is a sunk cost?
Money that has been spent in the past and should not be included in future investment decisions.
What does the learning curve theory state?
The unit cost decreases in a regular pattern as more items are produced repetitively.
What are reserves in cost management?
Dollars included in a cost estimate to mitigate cost risk.
What are contingency reserves?
Funds for future situations that may be partially planned for.
What are management reserves?
Funds for unpredictable future situations.
What is the importance of cost estimates in project management?
They are essential for completing projects within budget constraints.
What are the two basic types of cost estimates?
- Analogous estimates
- Bottom-up estimates
What is a cost model?
A tool to facilitate changes and document the estimate.
What is cost budgeting?
Allocating the project cost estimate to individual work items over time.
What is a cost baseline?
A time-phased budget used to measure and monitor cost performance.
What is earned value management (EVM)?
A project performance measurement technique that integrates scope, time, and cost data.
What does ‘planned value (PV)’ refer to?
The portion of the approved total cost estimate planned to be spent on an activity during a given period.
What is the actual cost (AC)?
The total of direct and indirect costs incurred in accomplishing work on an activity during a given period.
What does earned value (EV) estimate?
The value of the physical work actually completed.
Define the rate of performance (RP).
The ratio of actual work completed to the percentage of work planned to have been completed.
