Chapter 5 - PM Flashcards
The financial plans for allocating organization resources to project activities
Project budget
Recognize an expense when a invoice is received and the cost is actually incurred
Accountants
perceive an expense when the check for the invoice is mailed. Concerned with managing an organization’s cash flows
Controllers
Based on the collective judgement and experiences of top and middle managers concerning similar past projects
Top-down budgeting
WBS or action plan identifies the elemental tasks which are converted to costs and combined to determine an overall direct cost for the project
Bottom-up budgeting
statement within a proj contract that allows for renegotiation of price and schedule for client-ordered changes in performance
Change control procedure
Itemization of the estimated costs for ea. proj activity. Prepared by a PM based on WBS
Detailed Budget Estimate
Expenditures for resources that are used soley to perform project activities
Direct costs
Indirect costs that keep the organization operational
General and administrative costs
Expenditures that are incurred to support project activities but that aren’t tracked individually
Indirect costs
Percentage at which unit performance improves each time the total production quantity doubles
Learning rate
Designated amt of time & money to acct for parts of proj that cannot be predicted
Management reserve
Indirect costs assoc. with resources used to perform proj activities, but are difficult to subdivide and allocate directly
Overhead costs
Initial estimate of costs that is based on general sense of the type of work the proj will likely entail. AKA ballpark estimate
Rough order-of-magnitude (ROM) estimate
A number proj mgr can calculate to reveal whether cost estimates have a systematic bias in cost and whether the bias is positive or negative
Tracking signal
Budget allowance for surprising, unplanned incidents
Unexpected contingency
T or F: A budget ties a project to the organization’s aims and objectives.
True
To a controller a budget is
an expense when the check for the invoice is mailed.
You hire a part-time technical writer for your team’s upcoming project. The tech writer is contracted only to work the project for 40 hours total. What type of cost is the writer’s salary?
Direct project cost
During the conceive phrase of a project, the project manager should develop a budget that’s
a rough, order-of-magnitude estimate
To create a bottom-up budget estimate, the project manager needs to consider
direct labor costs, direct non-labor costs, and indirect costs.
Use of a tracking signal to evaluate your estimate reveals that you consistently over-estimate costs by an average of 15%. Your over-estimates can be considered
a systematic error
To determine the accuracy of an estimate over time, you need to take into account:
the learning rate and learning curve
Vince’s new product development team estimated cost to new team member training, but his project is still over-budget. One possible reason might be
Vince didn’t take into account the time established team members would be required to help train new team members.
