cost management

Question 1

what is cost

Answer 1

a resource sacrificed or foregone to achieve a specific objective or something given up in exchange

Question 2

processes of project cost management (4)

Answer 2

1. planning cost management
2. estimating costs
3. determining the budget
4. controlling costs

Question 3

profit is

Answer 3

revenue - expenditure

Question 4

profit margin is

Answer 4

the ratio of revenues to profits

Question 5

life cycle costing considers..

Answer 5

the total cost of ownership, or development plus support costs, for a project

Question 6

cash flow analysis determines..

Answer 6

the estimated annual costs and benefits for a project and the resulting annual cash flow

Question 7

types of costs and benefits (4)

Answer 7

• tangible
• intangible
• direct
• indirect

Question 8

tangible costs or benefits

Answer 8

costs or benefits that an organization can easily measure in dollars

Question 9

Intangible costs or benefits

Answer 9

costs or benefits that are difficult to measure in monetary terms

Question 10

direct costs

Answer 10

costs that can be directly related to producing the products and services of the project

Question 11

indirect costs

Answer 11

costs that are not directly related to the products or services of the project, but are indirectly related to performing the project

Question 12

reserves

Answer 12

money added to the project cost estimates to mitigate cost risk by allowing for future situations that are difficult to predict

Question 13

two types of reserves

Answer 13

• contingency

- management

Question 14

contingency reserves allow for

Answer 14

future situations that may be partially planned for (identified risks)

Question 15

management reserves allow for

Answer 15

future situations that are unpredictable (unidentified risks)

Question 16

what does the project team use to develop a cost management plan

Answer 16

• expert judgement
• meetings
• analytical techniques

Question 17

3 types of cost estimates

Answer 17

• rough order of magnitude (ROM)
• budgetary
• definitive

Question 18

tools and techniques used to estimate costs and explain them (3)

Answer 18

• analogous/top-down estimates: use the actual cost of a previous, similar project
• bottom-up estimates: involve estimating individual work items or activities and summing them
• parametric modeling: a mathematical model

Question 19

problems that can happen during costs estimation (4)

Answer 19

1. estimates are done too quickly
   2 lack in estimating experience
2. human beings are biased toward
3. management desires accuracy

Question 20

cost budgeting involves

Answer 20

allocating the project cost estimate to individual work items over time

Question 21

what is a required input for cost budgeting

Answer 21

a WBS

Question 22

goal of cost budgeting

Answer 22

to produce a cost baseline (cost estimates + contingency reserve)

Question 23

what does project cost control include (3)

Answer 23

• monitoring cost performance
• ensuring that only appropriate project changes are included in a revised cost baseline
• informing project stakeholders of changes that will affect costs

Question 24

why would an organization have problems with cost control

Answer 24

because many projects do not progress exactly as planned, new or revised cost estimates are often required

Question 25

what is earned value management

Answer 25

a project performance measurement technique that integrates scope, time, and cost data

Question 26

what does EVM involve calculating (3)

Answer 26

• PV
• AC
• EV
  for each activity or summary activity from a project’s WBS

Question 27

planned value (PV)

Answer 27

the authorized budget you assign to an activity or work breakdown structure

Question 28

actual cost (AC)

Answer 28

the realized cost incurred for the work performed on an activity during a specific time period

Question 29

earned value (EV)

Answer 29

the budget authorized for completed work

Question 30

how can a project manager tell problems are occurring during cost management (3)

Answer 30

• negative numbers for cost and schedule variance
• CPI and SPI less than 100%
• problems mean the project is costing more than planned (over budget) or taking longer than planned (behind schedule)

Question 31

rate of performance (RP)

Answer 31

the ratio of actual work completed to the percentage of work planned to have been completed

Question 32

the budget at completion (BAC)

Answer 32

is the original total budget for the project

Question 33

estimate at completion (EAC)

Answer 33

an estimate of what it will cost to complete the project based on performance to date.