Deep Dive into Project Costs and Estimates

Which inputs are needed for Earned Value Management?

1. Actual Cost 2. Earned Value 3. Budget at Completion

Analogous estimates (top-down) are used to determine the cost of the project. Which of these statements are true for analogous estimates?

1. Does not require creation of WBS A WBS is needed for bottom up estimation and not for analogous estimates. 2. Estimation is quick Analogous estimation is based on lessons learned from past projects and comparing it with tasks at hand. This makes estimation quick. 3. It is an inexpensive method Analogous estimates do not involve detailed calculations, but comparison with past projects requires less effort. This makes this technique quick and inexpensive. 4. It can be used for duration estimation Analogous estimation can be used for cost as well as duration estimates.

A team continuously assesses the performance of a project and calculates Estimate at Completion (EAC) from time to time. Which of these formulae can be used to calculate EAC? There may be more than one correct answer.

1. EAC = AC + ETC This is used when the team realizes that the original BAC is flawed. Team reassess the cost of all remaining work packages to arrive at Estimate to Complete (ETC). Adding AC and ETC, team gets the new EAC. 2. EAC = BAC/CPI EAC = BAC/CPI is used when the team expects the current rate of spending to continue till project end. 3. EAC = AC + (BAC - EV) EAC = AC + (BAC - EV) is used when the team believes that the deviation from baseline is an isolated incident and project would be back to normal spending in the future. 4. EAC = AC + [ (BAC-EV) / (CPI*SPI) ] EAC = AC + [ (BAC-EV) / (CPI*SPI) ] is used when project has a poor cost performance, but firm completion deadline.

Story points are a popular way to estimate the effort required for development. What are the advantages of using story points?

1. Helps remove competition between teams 2. Serves as a reference for future estimates 3. Removes pressure and emotion 4. Quick

The bottom up estimation technique is used to aggregate cost estimates at the project level. Which of these statements hold true for this technique?

1. Highly detailed 2. Expensive 3. Accurate and reliable 4. Based on work packages 5. Time consuming

Agile games are techniques that teams can use to solve problems, make decisions, estimate work, and build the team. Which of these are advantages of Agile games?

1. Improve Communication 2. Foster collaboration 3. Overcome destructive behaviors 4. Facilitate issue resolution

Velocity is a commonly used measure in Agile teams. Which of these options explain Velocity correctly?

1. It is different than capacity Capacity is the team's availability to do the work and velocity is the actual work completed by the team. 2. Usually measured in story points Velocity is the amount of development work completed by a team in a given timebox and is usually measured in story points. 3. Actual amount of development work completed in a sprint Velocity is typically measured in story points. While calculating the velocity, the team uses historical data of few sprints and takes an average to determine the actual amount of time. It is used in project forecasting Selected Correct answer. - This option is correct. A team's average velocity is used in determining how many sprints may be needed for the project to complete.

Earned Value Management compares actual performance with the plan, checks for variance, and helps decide the adjustments. Match each scenario with the correct project status. Each status can have more than one match.

1. Project is under budget: Cost variance is $50,000; Cost Performance Index is 1.23 (When Cost Variance (CV) is positive or Cost Performance Index (CPI) is more than one, the project is spending less money than planned. In such a case, the team knows project is under budget.) 2. Project is over budget: Cost Performance Index is 0.87; Cost Variance is - (minus) $45000 (When Cost Variance (CV) is negative or Cost Performance Index (CPI) is less than one, the project is spending more money than planned. In such case, the team knows project is over budget.)

Which costs are included while calculating the cost of non-conformance, as part of determining the Cost Of Quality (COQ)?

1. Warranty 2. Rework 3. Scrap 4. Loss of reputation 5. Lost business

Timing when money will be needed in the project is an important consideration while determining the project budget. Which of these components are included in finalizing the budget?

1. Work package cost estimates Work package cost estimates are an aggregation of the activity cost estimates & activity contingency reserves. 2. Management Reserve Management reserve is the money set aside by the management for unknown-unknowns of the project. Project budget is the sum total of cost baseline and management reserves. 3. Contingency reserve Contingency reserves are a provision of known risks in the project and are a part of the cost baseline. Contingency reserves added to all work package cost estimates gives the cost baseline.

Calculate the time taken for your travel to the airport from home, using PERT. Information available for time taken by you over the last few years: Best case scenario - 25 minutes Worst case scenario - 85 minutes Very often - 40 minutes

45 The PERT estimate uses the formula of (P+(4xML)+O) / 6, where P is a pessimistic estimate, O is an optimistic estimate and M is the most likely estimate of an activity. The PERT formula gives 4 times the higher weightage to the Most Likely estimate, which is generally provided by an expert.