CHAPTER 7: MANAGING PROJECT COSTS Flashcards
1
Q
ACTUAL COST (AC)
A
Actual amount of money spent to date
2
Q
Analogous Estimating
A
Based on historical information cost of project is predicted. Least reliable, top down estimating.
3
Q
BUTTOM UP ESTIMATING
A
- Starts from Zero
- accounts for each component of the WBS and sums them up
- most time consuming and reliable
4
Q
BUDGET ESTIMATE
A
- broad, often top down
- -10 to +25 percent range
5
Q
COMMERCIAL DATABASE
A
- uses a data base to estimate cost
6
Q
CONTINGENCY RESERVE
A
- allowance to account for overruns in costs
- used at pms discretion and with management’s approval to counteract overruns
7
Q
COST AGGREGATION
A
- Cost parallel to WBS WP
- Each WBS WP is aggregated to their control acc
- each controll acc is aggregated to the sum of project costs
8
Q
Cost Baseline
A
- time lapse of when money is to be spend in relation to cumulative value of the work completed in the project
9
Q
COST BUDGETING
A
- applies cost estimates over time
- cost aggregation assigning dollar amounts for each scheduled activity or each WP in the WBS
10
Q
COST CHANGE CONTROL SYSTEM
A
- system examines any changes associated with scope change, cost of materials or other resources
- impact on overall project costs
11
Q
COST MANAGEMENT PLAN
A
- plan that dictates how cost variances will be managed
12
Q
COST OF POOR QUALITY
A
- Cost of non conformance to quality
- e.g. rework, defect repair, loss of life
13
Q
COST OF QUALITY
A
- money spend to attain expected level of quality
- e.g. training, testing, safety precautions
14
Q
COST PERFORMANCE INDEX (CPI)
A
- Measures financial performance
- CPI = EV/AC
15
Q
COST VARIANCE (CV)
A
CV = EV - AC
16
Q
DEFINITIVE ESTIMATE
A
- accurate, late in planning phase
- buttom up
- based on WBS
- Variance -5 +10 percent
17
Q
Direct costs
A
- costs attributed directly to project work
- not shared with other projects
- e.g. hotels, phone calls etc
18
Q
EARNED VALUE
A
- physical work done and authorized budget for it
- percent if BAC that represents actual work completed
19
Q
ESTIMATE AT COMPLETION (EAC)
A
- forecasting formulas to predict the costs of the project at the time of completion
20
Q
ESTIMATE TO COMPLETE
A
- predicts how much funding the project will require to be completed
- 3 variations of formula based on project conditions
21
Q
FIXED COSTS
A
- remain constant throughout the life of the project
- e.g rental fee, consultant fee etc
22
Q
FUNDING LIMIT RECONCILIATION
A
- approach of managing cash flow against project deliverables based on schedule, milestone accomplishment or data constrains
23
Q
INDIRECT COSTS
A
- costs representative for more than one project
- PM software license, utilities for company etc
24
Q
KNOWN UNKOWNS
A
- Event that will likely happen
- but when and to what degree is unknown
25
LEARNING CURVE
- assumption that the cost per unit decreases the more units are produced
26
OLIGOPOLY
- tight market
- action of one vendor affects action of others
27
OPPORTUNITY COST
- cost of opportunity that is refused to realize an opposing opportunity
28
PARAMETRIC ESTIMATING
- using parametric model to extrapolate costs needed for a project
- e.g. cost per hour, cost per unit
29
PLANNED VALUE (PV)
- work scheduled and budget authorized to accomplish that work
- percentage of BAC reflecting where project should be at a given point of time
30
PROJECT VARIANCE
- discovered at project completion
- VAR = BAC - AC
31
REGRESSION ANALYSIS
- statistical approach predicting future values
- based on historical values
32
RESERVE ANALYSIS
- included in budget but not as cost baseline
- revmserve for unknown unkowns
33
ROUGH ORDER MAGNITUDE
- rough estimate used during initiating processes and top down estimates
- -25 to +75 percent of range
34
SCHEDULE PERFORMANCE INDEX (SPI)
- SPI = EV/PV
35
SCHEDULE VARIANCE
Difference between earned and planned value
- SV = EV - PV
36
SINGLE SOURCE
- many vendors existing
- prefer to work with selected vendor
37
Sole source
- only one vendor existing for what I need
- e.g. ASML
38
Sunk costs
- money already invested into project
39
TO COMPLETE PERFORMANCE INDEX (TCPI)
- formula to forecast likely hood of project achieving its goals based on what is happening
- meet BAC? TCPI = (BAC - EV)/(BAC-AC)
- Meet newly created estimate? TCPI = (BAC-EV)/(EAC-AC)
40
VARIABLE COSTS
- costs that change based on conditions applied in the project
41
VARIANCE
- difference between what was expected and what was experienced
42
VARIANCE AT COMPLETION (VAC)
- predict variance project will likely have based on current condition
- VAC = BAC - EAC
