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

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Planned value

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

10

## EV

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Earned value

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

11

## AC

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Actual cost ( total cost )

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

12

## BAC

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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

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EV - AC

Negative is over budget positive is under budget

17

## Schedule variance formula

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EV - PV

Negative is behind schedule positive is ahead of schedule

18

## Cost performance Index

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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

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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

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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

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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

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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

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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

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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