All-In-One Chapter 7 - Managing Project Costs Flashcards Preview

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Flashcards in All-In-One Chapter 7 - Managing Project Costs Deck (55):
1

Actual Cost (AC)

the actual amount of monies the project has spent to date

2

Analogous estimating

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

3

Bottom-up estimating

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

4

Budget estimate

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

5

Commercial database

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

6

Contingency reserve

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

7

Cost aggregation

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

8

Cost baseline

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

9

Cost budgeting

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

10

Cost change control system

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

11

Cost management plan

the cost management plan dictates how cost variances will be managed

12

Cost of poor quality

the monies spent to recover from not adhering to the expected level of quality.

13

Cost of quality

the monies spent to attain the expected level of quality within a project.

14

Cost performance index (CPI)

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

15

Cost variance (CV)

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

16

Definitive estimate

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

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Direct costs

costs are attributed directly to the project work and cannot be shared among projects

18

Earned Value (EV)

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

Estimate at completion (EAC)

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

20

Estimate to complete (ETC)

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

Fixed costs

costs that remain constant throughout the life of the project

22

Funding limit reconciliation

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

23

Indirect costs

costs that are representative of more than one project

24

Known unknown

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

Learning curve

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

26

Oligopoly

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

27

Opportunity cost

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

28

Parametric estimating

an approach using a parametric model to extrapolate what costs will be needed for a project. It can include variables and points based on conditions

29

Planned Value (PV)

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

Project variance

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

31

Regression analysis

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.

32

Reserve analysis

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

Rough order of magnitude

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

Schedule performance index (SPI)

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

35

Schedule variance (SV)

the difference between the earned value and the planned value. The formula is SV = EV - PV

36

Single source

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

37

Sole source

only one vendor can provide what your project needs to purchase.

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Sunk Costs

monies that have already been invested in a project

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To-Complete Performance Index

a formula to forecast the likelihood for a project to achieve its goals based on what's happening in the project right now.

40

Variable costs

costs that change based on the conditions applied in the project

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Variance

the difference between what was expected and what was experienced

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Variance at completion (VAC)

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.

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Planned Value (formula)

PV = percent complete of where the project should be

44

Earned Value (formula)

EV = percent complete * BAC

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Cost Variance (formula)

CV = EV - AC

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Schedule Variance (formula)

SV = EV - PV

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Cost Performance Index (formula)

CPI = EV / AC

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Schedule Performance Index (formula)

SPI = EV / PV

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Estimate at Completion - typical variance (formula)

EAC = BAC / CPI

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Estimate at Completion - atypical variance (formula)

EAC = BAC + AC - EV

51

Estimate at Completion (formula)

EAC = AC + ETC

52

Estimate to Complete (formula)

EAC = AC + ETC

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To-Complete Performance Index - BAC (formula)

(BAC - EV) / (BAC - AC)

54

To-Complete Performance Index - EAC (formula)

(BAC - EV) / (EAC - AC)

55

Variance at Completion (formula)

VAC = BAC - EAC