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PMP Exam > Chapter 7. Cost Management > Flashcards

Chapter 7. Cost Management Flashcards

1
Q

What are the four processes of Cost Management?

A

Plan Cost Management
Estimate Costs
Determine Budget
Control Costs

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2
Q

What are the outputs for the four processes of Cost Management?

A

Plan Cost Management - Cost Management Plan

Estimate Costs - Cost Estimates

Determine Budget - Cost Baseline and Project Funding Requirements

Control Costs - Work Performance Information and Cost Forecasts

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3
Q

What is Life-Cycle Costing?

A

It looks at the total cost of ownership from purchase or creation, through operations, and finally to disposal. Encompasses the bigger picture of ownership costs.

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4
Q

What is Value Engineering?

A

The practice of trying to get more out of the project in every possible way, to increase the bottom line, decrease costs, improve quality, shorten the schedule, and generally squeeze more benefit and value out of each aspect of the project.

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5
Q

What is the key to Value Engineering?

A

Reducing costs without reducing the scope of work.

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6
Q

When is the process of Plan Cost Management performed?

A

After scope and schedule activities have been performed.

Some exceptions apply: Overall budgets and/or budgetary constraints may be determined before the project is initiated.

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7
Q

What are the inputs to Plan Cost Management?

A

Project Charter
Project Management Plan
Enterprise Environmental Factors
Organizational Process Assets

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8
Q

What are the tools used in the process Plan Cost Management?

A

Expert Judgement, Data Analysis, and Meetings

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9
Q

What are the outputs of Plan Cost Management?

A

Cost Management Plan

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10
Q

What is a Cost Management Plan?

A

Document that describes how processes of Estimate Costs, Determine Budget, and Control Costs will be carried out. Becomes part of the project management plan. Specifies units of measure (USD, pesos, yen, etc), and levels of accuracy. Also specifies approval thresholds, how those approvals are carried out, and will define how cost performance is measured.

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11
Q

When is the process of Estimate Costs performed?

A

After Develop Schedule. This is because costs are estimates against schedule activities, so the project’s schedule has to be created first.

See graphic at bottom of p. 295.

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12
Q

What is the leeway for a Rough Order of Magnitude?

A

-25% to +75%

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13
Q

What is the leeway for a Preliminary Estimate?

A

-20% to +30%

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14
Q

What is the leeway for a Definitive Estimate?

A

-5% to +10%

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15
Q

What are the three estimate types?

A

Rough Order of Magnitude Estimates, Preliminary Estimate, Definitive Estimate

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16
Q

When is a Rough Order of Magnitude used?

A

During the initation of a project, where very little has been defined.

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17
Q

What is the inputs for the process Estimate Costs?

A 
Project Management Plan
Project Documents
 - Lessons Learned Register
 - Project Schedule
 - Resource Requirements
 - Risk Register
Enterprise Environmental Factors
Organizational Process Assets
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18
Q

What are the tools used for the process Estimate Costs?

A 
Expert Judgement
Analogous Estimating
Parametric Estimating
Bottom-Up Estimating
Three-Point Estimating
Data Analysis
 - Alternative Analysis
 - Reserve Analysis
 - Cost of Quality
Project Management Information System
Decision Making
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19
Q

What is Analogous Estimating?

A

Uses the actual results of projects that have been performed by your organization as the estimates for your activities.

20
Q

What is Parametric Estimating?

A

Used on projects that have good historical information, and it works best for linear, scalable projects.

21
Q

What is Bottom-Up Estimating?

A

Produces a separate estimate for each schedule activity. Estimates are then aggregated up to summary nodes on the WBS.

Considered highly accurated, but time-consuming and labor-intensive.

22
Q

What is a continengency or reserve?

A

A buffer against cost slippage on the project.

23
Q

What is Cost of Quality, or COQ?

A

Looks at all costs that will be realized in order to achieve quality.

24
Q

What are the costs of items that are not conformant to quality standards known as?

A

Cost of Poor Quality (CoPQ)

25
Q

What are the outputs of the process Estimate Costs?

A

Cost Estimates
Basis of Estimates - supporting documentation/detail
Project Document Updates

26
Q

When is the process Determine Budget performed?

A

After Estimate Costs. See graphic pg. 301

27
Q

What are the inputs for the process Determine Budget?

A 
Cost Management Plan
Resource Management Plan
Scope Baseline
Project Documents 
 - Basis of Estimates
 - Cost Estimates 
 - Project Schedule
 - Risk Register
Business Documents
 - Business Case
 - Benefits Management Plan
Agreements
Enterprise Environmental Factors
Organizational Process Assets
28
Q

What tools are used in the process Determine Budget?

A 
Expert Judgement
Cost Aggregation
Data Analysis
Historical Information Review
Funding Limit Reconciliation
Financing
29
Q

What is Cost Aggregation?

A

Taking individual cost of activities and rolling them up to the work package level where they will be measured, managed and controlled during the project.

30
Q

What does Data Analysis primarily look at in the process Determine Budget?

A

Management Reserve, to protect against cost overrun.

31
Q

What is the difference between a Contingency Reserve and a Management Reserve?

A

Contingency reseres are risk amounts for activity overrun, while management reserve is an amount controlled by the project manager for complete unknowns or similar risks.

32
Q

What is Funding Limit Reconciliation?

A

The reconciliation of plannined spending with funding limits. The project’s cost baseline needs to be compatible with the limitations.

33
Q

What are the outputs of the process Determine Budget?

A

Cost Baseline *includes cost estimates with contingency reserves
Project Funding Requirements
Project Documents Updates

34
Q

What makes up the project’s budget?

A

The Cost Baseline + Management Reserve

35
Q

Project funding requirements consist of ?

A

Cost Baseline + Management Reserves

36
Q

What are two key aspects of controlling processes?

A

They are proactive. They do not wait for changes to occur. They try to influence the factors that lead to change.

Controlling processes measure what was executed against what was planned. If there are variances, then appropriate steps are taken to bring the two back in alignment.

37
Q

What are two key aspects of controlling processes?

A

They are proactive. They do not wait for changes to occur. They try to influence the factors that lead to change.

Controlling processes measure what was executed against what was planned. If there are variances, then appropriate steps are taken to bring the two back in alignment.

38
Q

When is the process Control Costs performed?

A

Regularly throughout the life of the project, beginning as soon as the project first incurs cost.

39
Q

What are the inputs to Control Costs?

A 
Project Management Plan - includes cost baseline and cost management plan.
Project Documents
Project Funding Requirements
Work Performance Data
Organizational Process Assets
40
Q

What are the tools used in Control Costs?

A 
Expert Judgement
Data Analysis
 - Earned Value Analysis
 - Variance Analysis
 - Trend Analysis
 - Reserve Analysis
TCPI
Project Management Information System (PMIS)
41
Q

What is Earned Value Analysis?

A

Earned Value is a method of measuring actual performance against the original plan. Analysis of Earned Value is used to help identify areas where the project is performing differently than the plan, such as Cost Variance or trends (Cost Performance Index) that directly influence the Control Costs process.

42
Q

What is Reserve Analysis?

A

Analyzing the the reserve (pools of money) set aside to keep the project running smothing in case a risk event occurs, to determine the project still has the right amount set aside.

43
Q

What is TCPI?

A

To-Complete Performance Index - an earned value technique that focuses on the performance needed in order to achieve your earned value targets.

44
Q

How does Project Management iInformation System (PMIS) benefit Control Costs?

A

it can be used to calculate actual values and assist with what if analysis

45
Q

What are the outputs of Control Costs?

A 
Work Performance Information
Cost Forecasts
Change Requests
Project Management Plan Updates
Project Document Updates
46
Q

How does the Agile Method incorporate cost management?

A

Agile project may estimate costs for the next iteration in detail but would not try to create an accurate, long-term plan.

Some budge estimates could be extrapolated by calculating the team “burn rate” (cost of a team per period), but this would not be highly detailed or highly precise.

Costs are managed at an iteration level. While formal budgets are not usually apart of Agile, transparency and forecasting are.

47
Q

What is EVM?

A

Earned Value Management, not usually compatible with Agile projects

PMP Exam (15 decks)

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