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Flashcards in Cost Management Deck (33):
1

Value analysis

Focus is to find a less costly way to do the same work

2

Cost risk

Cost related risk and crosses across multiple knowledge areas

3

Plan cost management

How you're going to plan manage and control project costs

4

Return on investments

Used to measure the potential profitability of an investment by calculating the benefits received in relation to the cost

5

Discounted cash flow

Technique to estimate the attractiveness of an investments by predicting how much money will be relieved in the future and discounting it to its current value

6

Estimate costs

Coming up with cost estimates for each activity

7

Types of costs

Variable costs - change with the amount of production or the amount of work ex: materials supplies and wages

Fixed costs - do not change as production changes ex: set-up, rent, utilities

Direct costs - directly attributed to the work on the project ex: travel, team wages, recognition and cost of material used on the project

Indirect Costs - overhead items or costs incurred for the benefit of more than one project ex: taxes fringe benefits and janitorial services

8

Bottom up estimating

Creating detailed estimate for each part of an activity or work package estimates are then rolled up into control accounts and then into an overall project estimate

9

PV

Planned value

As of today what is the estimated value of the work planned to be done

10

EV

Earned value

As of today what is the estimated value of the work actually accomplished

11

AC

Actual cost ( total cost )

As of today what is the actual cost incurred for the work accomplished

12

BAC

Budget at completion

How much did we budget for the total object effort

13

EAC

Estimate at completion

What do we currently expect the TOTAL project to cost

14

ETC

Estimate to complete

From this point on how much more do we expect it to cost to finish the project

15

VAC

Variance at completion

As of today how much over or under budget do we expect to be at the end of the project

16

Cost variance formula

EV - AC

Negative is over budget positive is under budget

17

Schedule variance formula

EV - PV

Negative is behind schedule positive is ahead of schedule

18

Cost performance Index

EV / AC

We are getting x amount worth of work out of every $1 spent

Greater than one is good less than one is bad

19

Schedule performance

EV / PV

We are only progressing at x% of the rate originally planned

Greater than 1 is good less than 1 is bad

20

Variance at completion

BAC - EAC

How much over or under budget will we be at the end of the project

21

Estimate to complete

EAC - AC

How much more will the project cost

22

To complete performance index formula

(BAC - EV ) / (BAC - AC)

In order to stay in budget what rate must we meet for the remaining work

23

Estimate at completion

AC + bottom up ETC

Calculates the actual costs to date plus a new estimate for the remaining work

BAC / CPI

Used if no variances from the BAC have occurred or you will continue at the same rate of spending

AC + (BAC - EV)

Calculates actual costs to date plus remaining budget

AC + (BAC - EV) / CPI x SPI)

Calculates actual to date plan plus the remaining budget modified by performance

24

Rough order of magnitude estimate

Made during project initiating

-25 to +75 percent from actual

25

Budget estimate

Made during project planning

-10 to + 25 percent from actual

26

Definitive estimate

+/-10 percent from actual

27

Life cycle costing

Looking at the cost of the life of the product not just the cost of the project

28

Cost management plan

Currency
Reporting formats to be used
Rules for measuring cost performance
Control thresholds
Cost change control procedures
Funding decisions
How cost activities will be conducts
Rules for measuring cost performance

29

Inputs to estimating costs

Cost management plan
Scope baseline
Project schedule
HR management plan
Risk register
Enterprise environmental factors
Organizational process assets
Project management costs

30

How is cost estimating done

One-point estimating
Analogous estimating
Parametric estimating
3 point estimating
Bottom up estimating

31

Control costs

Follow the cost management plan
Look at organizational process assets
Reserve analysis
Determine variances by measuring
Use progress reporting
Earned value management

32

Accuracy of estimates

Estimates should be in a range and over time you can narrow the estimate range

Organizations have different standards for different ranges

Rough order of magnitude (rom) estimates - initiating
Budget estimate - planning
Definitive estimate - as the project progresses

33

Determine budget

Inputs
- cost management plan
- risk register ( for contingency reserves)
- scope baseline
- project schedule
- org process assets
- activity cost estimates
- basis of estimates
- resource calendars
- agreements about cost

PM must perform risk management activists and include reserves in the estimate