Project Cost Management

Question 1

Project Cost Management

Answer 1

Includes processes involved in planning, estimating, budgeting, financing, funding, managing and controlling costs so that the project can be completed within the approved budget

Question 2

budget

Answer 2

spreads cost over time, allocating funds to the resources needed to have the project meet its schedule

Question 3

contingency reserve

Answer 3

costs of the response solutions from known project risks

Question 4

cost baseline

Answer 4

the approved version of the time phased project budget, excluding any management reserves; basis for comparison to actual results; only changed through change control process; includes contingency reserves

Question 5

Cost Management Tailoring Considerations (5)

Answer 5

1. knowledge management
2. estimating an budgeting
3. earned value management (EVM)
4. agile methodologies
5. governance

Question 6

Cost Management Trends and Practices

Answer 6

1. earned value management

2. earned schedule

Question 7

Earned Value Management (EVM)

Answer 7

methodology that combines scope, schedule and resource measurements to assess project performance and progress against the project baseline
SV = EV - PV (schedule variance = earned value - planned value)
best technique for controlling costs

Question 8

Earned Schedule (ES)

Answer 8

TV = ES - AT (time variance = earned schedule - actual time)

If TV is positive the project is ahead of schedule, if negative it is behind schedule

Question 9

Plan Cost Management

Answer 9

planning ahead for how costs are estimated, allocated, and controlled

Question 10

cost management plan

Answer 10

documents cost management processes; defines how the project costs will be estimated, budgeted, managed, monitored, and controlled; may establish: units of measure, level of precision, level of accuracy, procedures; thresholds; reporting formats

Question 11

Estimate Costs

Answer 11

sets the stage for the budget and allows you to consider the features and details of project activity; develop an approximation of the cost of resources needed to complete project work; include input from subject matter experts (SMEs)

Question 12

cost estimate

Answer 12

a quantitative assessment or prediction of the likely costs of resources required to complete work (labor, materials, equipment, services, facilities); include contingency reserve; included basis for estimate and assumed accuracy

Question 13

progressive elaboration

Answer 13

as the project progresses, the scope will become clearer and estimates will become more accurate

Question 14

Rough Order of Magnitude (ROM)

Answer 14

estimate of the costs provided in the early stages of a project when scope and requirements not fully defined

Question 15

analogous cost estimate

Answer 15

uses historical data from a similar activity to compare current work to previous similar work; ratio of current work to previous work is multiplied by previous cost

Question 16

parametric estimating

Answer 16

uses statistical relationship between historical data and other variables to calculate a cost estimate

Question 17

bottom-up estimating

Answer 17

takes detailed estimates at the work package level to determine the most accurate estimate

Question 18

three point estimating

Answer 18

used to account for uncertainty in the cost estimate
(estimate, optimistic, most likely, pessimistic)
cE = (cO + cM + cP) / 3
cE = (cO + 4cM + cP) / 6 —> beta distribution equation

Question 19

Determine Budget

Answer 19

aggregate estimated costs of individual activities or work packages to establish an authorized cost baseline

Question 20

project budget

Answer 20

includes all of the funds authorized to execute the project

Question 21

Control Costs

Answer 21

monitor the budget to look for variances from the approved cost baseline; requires knowledge of actual costs spent to date and analyzing the relationship between the consumption of funds to the work being required; isolate and understand variances from approved cost baseline; preventing unapproved changes; informing stakeholders

Question 22

work performance information

Answer 22

information on how the project work is performing compared to the cost baseline

Question 23

budget at completion (BAC)

Answer 23

total budget allocated to the project

Question 24

estimate at completion (EAC)

Answer 24

expected total cost of completing all work expressed

EAC = AC + ETC (actual cost + estimate to complete)

Question 25

earned value analysis (EVA)

Answer 25

shows the health of the project be integrating scope, schedule, and cost; can be reported for current period, cumulatively, and forecast; efficiency required to complete the project

Question 26

planned value (PV)

Answer 26

authorized budget assigned to schedule work; also referred to as performance measurement baseline (PMB)

Question 27

earned value (EV)

Answer 27

measurement of work performed until a specific date; monetary value as a result of work performed; used to calculate percent complete

Question 28

actual cost (AC)

Answer 28

budget spent until a specific date for the work performed until that date

Question 29

variance analysis

Answer 29

collects and assembles information on project performance variances; schedule, cost, quality

Question 30

variance at completion (VAC)

Answer 30

projection of the amount of budget deficit or surplus expressed as the difference between the budget at completion and the estimate at completion
VAC = BAC - EAC

Question 31

schedule variance (SV)

Answer 31

measure of schedule performance

SV = EV - PV (earned value - planned value)

Question 32

cost variance (CV)

Answer 32

amount of budget deficit or surplus at a given point in time

CV = EV - AC (earned value - actual cost)

Question 33

schedule performance index (SPI)

Answer 33

measure of schedule efficiency; if the result is greater than 1 more work was completed than planned
SPI = EV / PV (earned value / planned value)

Question 34

cost performance index (CPI)

Answer 34

measures the cost efficiency of budgeted resources; if the result is greater than 1 the project is saving money
CPI = EV / AC (earned value / actual cost)

Question 35

trend analysis

Answer 35

examines project performance over time to determine if performance is improving or deteriorating; represented by lines on a chart
EAC = AC + (BAC - EV)

Question 36

reserve analysis

Answer 36

used to monitor the status of contingency and management reserves to determine if these reserves ares still needed or if additional reserves should be requested

Question 37

to-complete performance index (TCPI)

Answer 37

measurement of the cost performance that should be achieved with the remaining resources in order to meet management goal; indication of efficiency needed
TCPI = (BAC - EV) / (BAC - AC)