CAPM Chapter 7: Project Cost Management

The pessimistic cost estimate for an activity is $5,000, the optimistic estimate is $3,000, and the most-likely estimate is $4,000. Calculate the expected estimate by using the PERT technique, where the most-likely scenario is given a weight of 4 as compared to the weight of 1 for each of the pessimistic and optimistic scenarios.

$4,000 (5000 + 4(4000) + 3000) / 6

There are only three variables/parameters that need to be monitored and developed closely for EVM. The rest of the parameters and the earned value analysis are largely based on these three fundamental parameters. State these three parameters

1. Planned Value (PV) 2. Earned Value (EV) 3. Actual Cost (AC)

Describe how the scope baseline is relevant in determining project budget

It is an input that e includes the project scope statement, WBS, and WBS dictionary details for cost estimation and management. - information about project work and activities are important for determing the overall project budget

Describe how the risk register is relevant in determining project budget

It is an input that holds information on risk responses, and should be reviewed when considering how to aggregate the risk response costs.

Describe how the project schedule is relevant in determining project budget

It is an input that includes planned start and finish dates for the project's activities, milestones, work packages, and control accounts. This information can be used to aggregate costs to the calendar periods in which the costs are planned to be incurred.

How is the benefits management plan relevant to determining budget?

It is an input that includes the target benefits, such as net present value calculations, timeframe for realizing benefits, and the metrics associated with the benefits

How is the resource management plan relevant to determining budget?

It is an input that provides information on rates (personnel and other resources), estimation of travel costs, and other foreseen costs that are necessary to estimate the overall project budget

How is the cost management plan relevant to determining budget?

It is an input that serves as a guide on how to determine the budget and describes how the project costs will be structured into the project budget.

Describe how the risk register is relevant to estimating costs

It is an input to estimating costs because both kinds of risks—threats and opportunities—have an impact on the cost in the form of risk-mitigation costs and revenues or savings from the opportunities. So, the detailed information about risks provided in the risk register can be used in cost estimates

Describe how the schedule baseline is relevant to estimating costs

It is an input to estimating costs because you need information on resources in order to estimate the costs of resources. The schedule baseline gives you the required information about the resources needed along the timeline to complete the project work.

Describe how the qualtiy management plan is relevant to estimating costs

It is an input to estimating costs because you need information on resources in order to estimate their costs. This document contains quality-related resource information, as it describes the activities and the resources needed to perform those activities in order to meet the planned project quality objectives.

Describe how the resource requirements is relevant to estimating costs

It is an input to estimating costs because you need information on resources in order to estimate their costs. This document gives detailed information about the identification, type, quantity, etc. of resources

Describe how the scope baseline is relevant to estimating costs

It is an input to estimating costs because you need to collect information on the activities required to complete the project. Costs are associated with the project activities.

Describe how the cost management plan is relevant to estimating costs

It is an input to estimating costs that serves as a guide on how to perform the estimate costs process, e.g. methods, units, and precision level to use.

Describe how the performance measurement baseline is related to controlling costs

It is an input when using earned value analysis, the performance measurement baseline is compared to actual results to determine if a change, corrective action, or preventive action is necessary

Describe how agreements are related to determining the budget

It is an input where applicable agreement information and costs relating to products, services, or results that have been or will be purchased are included when determining the budget.

How is the business case relevant to determining budget?

It is an input where you can collect information about financial factors that are critical for the project success

Describe how the cost estimates are relevant in determining project budget

It is an input wherein cost estimates for each activity within a work package are aggregated to obtain a cost estimate for each work package. Aggregation is the method for which the project budget is determined.

Describe how activity cost estimates are relevant to estimating costs

It is an output that documents the quantitative estimates of various costs required to complete the project work. - Depending on the project and the stage of the project, the cost estimates may be documented in summary form or in detail. - These estimates include costs for all resources needed to complete the project work, including team members, equipment, facilities, information technology, labor directly applied to the project work, material, services, etc.

Describe how basis of estimates are relevant to estimating costs

It is an output that documents what the bases were of the cost estimates May include: - methods used to develop the estimates (e.g. three-point or analogous) - assumptions made about the estimates - constraints that affected the estimates - uncertainty, such as +- 10%

Describe how funding requirements is relevant to determining budget

It is an output that is derived from the cost baseline, another output of this process, where funding for the project is documented to account for costs stated in the cost baseline. - usually made in increments etc quarterly funding, annual funding

Describe how the cost baseline is relevant to determining project budget

It is an output that represents the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures. It is used as a basis for comparison to actual results.

Describe how alternative analysis is relevant to estimating costs

it is a tool/technique that allows you to choose one or a few out of many available options of alternative cost estimate methods

What are the non-general tools/techniques used in estimating costs?

1. Analogous estimating 2. Bottom-up estimating 3. Parametric estimating 4. Three-point estimating

What are the non-general tools/techniques used in controlling costs?

1. Earned value analysis 2. Variance analysis 3. Trend analysis 4. Reserve analysis 5. To-complete performance index

State the processes of project cost management

1. Plan Cost Management 2. Estimate Costs 3. Determine Budget 4. Control Costs

State the 4 main processes of project cost management

1. Planning cost management 2. Estimating costs 3. Determining project budget 4. Controlling costs

The three most important takeaways from project cost management are the following: 1. Project cost is estimated from project ___, project ___, and project ___ requirements. - ___ is project cost along the timeline. 2. Cost control involves converting the cost-related ___ into ___ by comparing the data with the integrated baseline: ___ baseline, ___ baseline, and ___ baseline. 3. This comparison is made by using ___, in which there are several variables based on three fundamental parameters: - ___ - ___ - ___

1. Project cost is estimated from project scope, project schedule, and project resource requirements. - Project budget is project cost along the timeline. 2. Cost control involves converting the cost-related work performance data into work performance information by comparing the data with the integrated baseline: scope baseline, schedule baseline, and cost baseline. 3. This comparison is made by using earned value management (EVM), in which there are several variables based on three fundamental parameters: - actual cost (AC) - earned value (EV) - planned value (PV)

Define Variance at Completion (VAC) + what is the formula?

A projection of the amount of budget deficit or surplus, expressed as the difference between the budget at completion and the estimate at completion. - The estimated difference in cost at the completion of the projec VAC = BAC - EAC

Assume that you are the project manager for the construction of a 15-mile road. Further assume that the work is uniformly distributed over 12 weeks. The total approved budget for this project is $600,000. At the end of first three weeks of work, $160,000 has been spent, and five miles of road have been completed. What is the cost variance? A. $40,000 B. $50,000 C. -$40,000 D. $120,000

A. $40,000

The cost of a project activity is estimated to be $500 with ±10% accuracy. What is the estimated range of cost? A. $450-$550 B. $490-$510 C. $475-$525 D. $500-$550

A. $450-$550

You are in the process of developing the cost baseline for your project. What is the name of this process? A. Determine Budget B. Develop Cost Baseline C. Estimate Costs D. Control Costs

A. Determine Budget

Which of the following processes will you perform first? A. Estimate Activity Resources B. Determine Budget C. Estimate Costs D. Develop Schedule

A. Estimate Activity Resources

Your supervisor has asked you to put some contingency reserves into your project plans. Which of the following is not true about contingency reserves? A. These are the funds and not the time. B. These are included in the cost baseline. C. These are included in the budget. D. These are included in the project funding requirement.

A. These are the funds and not the time.

Activity resources are estimated by performing the ___ process, and this process should be closely coordinated with the ___ process.

Activity resources are estimated by performing the Estimate Activity Resources process, and this process should be closely coordinated with the Estimate Costs process.

Assume that you are the project manager for the construction of a 15-mile road. Further assume that the work is uniformly distributed over 12 weeks. The total approved budget for this project is $600,000. At the end of first three weeks of work, $160,000 has been spent, and five miles of road have been completed. What is the earned value of the project at the end of the first three weeks? A. $160,000 B. $200,000 C. $150,000 D. $600,000

B. $200,000

Assume that you are the project manager for the construction of a 15-mile road. Further assume that the work is uniformly distributed over 12 weeks. The total approved budget for this project is $600,000. At the end of first three weeks of work, $160,000 has been spent, and five miles of road have been completed. What is the schedule variance? A. $40,000 B. $50,000 C. Three weeks D. Twelve weeks

B. $50,000

You are managing a project in biotechnology code named Mitochondria Eve. You need work performance measurements or information to write the performance reports. Which process(es) will you run? A. Monitor and Control Project Work B. Control Scope, Control Schedule, and Control Costs C. Develop Project Work Performance Report D. Direct and Manage Project Work

B. Control Scope, Control Schedule, and Control Costs

A project has a CPI value of 1.25 and an SPI value of 1.33. It means which of the following? A. The project is making slower progress and costing more than planned. B. The project is making faster progress and costing less than planned. C. The project is making slower progress and costing less than planned. D. The project is making faster progress and costing more than planned.

B. The project is making faster progress and costing less than planned.

Assume you are a project manager for the construction of a 16-mile road. Further assume that the work is uniformly distributed over 12 weeks. The total approved budget for this project is $600,000. At the end of the first four weeks of work, $125,000 has been spent, and four miles of road has been completed. What is the BAC? What is the EV? What is the AC? What is the CV? What is the CPI? What is the PV? What is the SV? What is the SPI? What is the ETC at the Budgeted Rate? What is the ETC at the Present CPI? What is the EAC at the Budgeted Rate? What is the EAC at the Present CPI? What is the EAC at the present CPI and present SPI? What is the TCPI with the goal of completing the project within the BAC?

Budget at Completion (BAC) The total budget authorized for performing the project work. It is $600,000. Earned Value (EV) EV is the budget associated with the authorized work that has been completed. EV = BAC x (work completed / total work required) EV = $600,000 x (4 miles/16 miles) = $150,000 Actual Cost (AC) The total cost actually incurred performing the work for a project until a specific point on the timeline. - this cost is to be compared with the earned value to calculate the cost variance and cost performance. It is $125,000 Cost Variance (CV) A measure of cost performance in terms of the deviation of reality from the plan - it is obtained by subtracting the actual cost (AC) from the earned value (EV) CV = EV - AC CV = $150,000 - $125,000 CV = $25,000 This positive value means we are under budget. Cost Performance Index (CPI) A measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost. CPI = EV/AC CPI = $150,000 / $125,000 = 1.2 The CPI indicates a good performance in terms of cost. Planned Value (PV) The authorized cost for the scheduled work on a project or a project activity up to a given point on the timeline. PV = BAC x (time passed / total schedule time) PV = $600,000 x (4 weeks/12 weeks) = $200,000 Schedule Variance (SV) The deviation of the performed schedule from the planned schedule in terms of cost. - it is calculated as the difference between EV and PV SV = EV - PV SV = $150,000 - $200,000 SV = -$50,000 The negative value indicates we are behind schedule. Schedule Performance Index (SPI) Indicates how the performed work compared to the planned work. - This is a measure of the schedule efficiency of a project calculated by dividing earned value (EV) by planned value (PV) SPI = EV/PV SPI = $150,000 / $200,000 SPI = 0.75 This indicates that the project is progressing at 75 percent of the planned pace—not good. Estimate to Complete (ETC) at the Budgeted Rate The prediction about the expected cost to complete the remaining work for the project. - The future work is assumed to be completed at the budgeted rate. - the value of the ETC is obtained by subtracting the earned value (EV) from the budget at completion (BAC) ETC = BAC - EV ETC = $600,000 - $150,000 ETC = $450,000 Estimate to Complete (ETC) at the Present CPI This is the prediction about the expected cost to complete the remaining work at the present CPI. ETC = (BAC - EV) / CPI ETC = ($600,000 - $150,000) / 1.2 ETC = $375,000 Estimate at Completion (EAC) at the Budgeted Rate This is the estimate made at the current point in time for how much it will cost to complete the whole project or a project activity from beginning to end. - It is assumed that the future work will be performed at the budgeted rate. - the value of the EAC is obtained by adding the value of ETC at budgeted rate to AC EAC = AC + ETC (budgeted rate) EAC = $125,000 + $450,000 EAC = $575,000 Estimate at Completion (EAC) at the Current CPI This is the estimate made at the current point in time for how much it will cost to complete the whole project or a project activity from beginning to end. - It is assumed that the future work will be performed at the current CPI. EAC = AC + ETC (current CPI) EAC = $125,000 + $375,000 EAC = $500,000 Estimate at Completion (EAC) at the present CPI and present SPI? ETC (present CPI and present SPI) = (BAC - EV) / (CPI x SPI) = ($600,000 - $150,000) / (1.2x0.75) = $500,000 EAC = AC + ETC (present CPI and present SPI) EAC = $125,000 + $500,000 EAC = $625,000 To-Complete Performance Index (TCPI) The variable used to predict the future performance needed to finish the work according to a specified goal. In this case, within the planned budget (BAC) TCPI = Remaining work / Remaining funds TCPI = (BAC - BCWP) / (BAC - ACWP) TCPI = (BAC - EV) / (BAC - AC) TCPI = ($600,000 - $150,000) / ($600,000 - $125,000) TCPI = 0.95 or 95%

Budget is the cost with a ___.

Budget is the cost with a timeline.

Assume that you are the project manager for the construction of a 15-mile road. Further assume that the work is uniformly distributed over 12 weeks. The total approved budget for this project is $600,000. At the end of first three weeks of work, $160,000 has been spent, and five miles of road have been completed. What is the planned value of the project at this point in time? A. $160,000 B. $200,000 C. $150,000 D. $600,000

C. $150,000

An influential stakeholder has submitted a request for completing the project earlier than planned in less time. What are the two parameters that are most likely to be affected by this time change? A. Schedule and deliverables B. Quality and risk C. Cost and scope D. Cost and budget

C. Cost and scope

___ are the funds that can be used to deal with the unplanned events that can potentially transpire—e.g.; in case of one or more identified risks occur. On the other hand, ___ are the funds that can be used in case of unplanned changes that are within the project scope but were missed during planning.

Contingency reserves are the funds that can be used to deal with the unplanned events that can potentially transpire—e.g.; in case of one or more identified risks occur. On the other hand, management reserves are the funds that can be used in case of unplanned changes that are within the project scope but were missed during planning.

The cost forecasts is an output of which: - process - knowledge area - process group

Control Costs - cost management - monitor and control

Name three processes that convert the work performance data into work performance information

Control Scope, Control Schedule, and Control Cost

___ is the process of monitoring and controlling the cost performance and the resulting updates and changes to the costs, budget, and cost baseline of the project

Controlling costs is the process of monitoring and controlling the cost performance and the resulting updates and changes to the costs, budget, and cost baseline of the project

Give the formula for Cost Performance Index (CPI) Describe what it means when Cost Performance Index (CPI) is: - Greater than 1.0 - Exactly 1.0 - Less than 1.0

Cost Performance Index (CPI) CPI = EV / AC Greater than 1.0 = under planned cost Exactly 1.0 = on planned cost Less than 1.0 = over planned cost

Give the formula for Cost Variance (CV) Describe what it means when Cost Variance (CV) is: - positive - neutral - negative

Cost Variance (CV) CV = EV - AC Positive = under planned cost Neutral = on planned cost Negative = over planned cost

What is the main tool/technique used in determining budget?

Cost aggregation

___ is calculated by subtracting the actual cost (AC) from the earned value (EV), not from the planned value (PV).

Cost variance (CV) is calculated by subtracting the actual cost (AC) from the earned value (EV), not from the planned value (PV

Which of the following is not listed as an input item in PMBOK to develop the cost management plan? A. Project charter B. Schedule management plan C. Risk management plan D. Quality management plan

D. Quality management plan

Project cost performance is measured by comparing the project results from work performance data against the integrated performance measurement baseline. Which of the following are the three elements of this integrated performance measurement baseline? A. Scope baseline, time baseline, and cost baseline B. Scope baseline, schedule baseline, and quality baseline C. Scope baseline, time baseline, and quality baseline D. Schedule baseline, scope baseline, and cost baseline

D. Schedule baseline, scope baseline, and cost baseline

The cost baseline is an output of which: - process - knowledge area - process group

Determine Budget - cost management - planning

The project funding requirements is an output of which: - process - knowledge area - process group

Determine Budget - cost management - planning

Prove the validity of the following equation: EAC = AC + BAC - EV

EAC is also written as: EAC = AC + ETC ETC is written as: ETC = BAC - EV Therefore, using substitution: (AC + ETC) = AC + BAC - EV (AC + BAC - EV) = AC + BAC - EV

For cost performance analysis: EV = BAC x ??? CV = EV - ??? CPI = EV / ???

EV = BAC x (work completed / total work required) CV = EV - AC CPI = EV / AC

When is the probability of influencing the project cost at its maximum?

Early in the project

The cost estimates is an output of which: - process - knowledge area - process group

Estimate Costs - cost management - planning

True or False: Three-point estimations and analogous estimation usually are more time consuming but also more accurate than parametric estimation and bottom-up estimation

False Three-point estimations and analogous estimation usually are less time consuming but also less accurate than parametric estimation and bottom-up estimation

True or False: Cost variance (CV) is calculated by subtracting the actual cost (AC) from the planned value (PV)

False Cost variance (CV) is calculated by subtracting the actual cost (AC) from the earned value (EV), not from the planned value (PV)

You are being interviewed by a functional manager for a project manager position. He describes the following conditions: 1. The project is way behind the schedule. 2. No extra resources, such as money or project team members to perform activities, are available. 3. You have to implement all the planned features. The question he asks is: what will you do to meet the deadline that is approaching within a week?

From a project management viewpoint, this situation is a good example of the triple constraint - you cannot change one of the triple constraint (scope, time, cost) without changing at least one of the other two. The project is behind schedule, so you might be able to apply leads and lags, float, smoothing techniques, and schedule compression techniques (such as crashing and fast tracking). - However, in most of these situations, at least one of the other two parameters must change. If you want to meet the deadline, either you should be allotted more funds to hire more resources or the scope of the project should be changed, which means some of the features would be left out. Project management is not magic; it involves dealing with cold, hard reality in a realistic way, thereby establishing clear and achievable objectives.

Why is scope, schedule, and cost considered a triple constraint?

If one of the parameters change, at least one of the other two must change as well. In image: a triangle of the triple constraint. Changing the length of one side will result in changing the length of at least one of the other two sides

In every stage or funding period: Cost baseline = ___ + ___ Funding requirements = ___ + ___

In every stage or funding period: Cost baseline = anticipated expenditure + anticipated liabilities Funding requirements = cost baseline + management reserves

Describe how financing is relevant to determining the budget

It is a tool/technique that involves acquiring funding for projects. If a project is funded externally, the funding entity may have certain requirements that are required to be met

Describe how work performance data is related to controlling costs

It is an input as it contains data on project status such as which costs have been authorized, incurred, invoiced, and paid. This is compared to the cost baseline to see if changes are needed.

Describe how the cost baseline is related to controlling costs

It is an input, where the cost baseline is s compared with actual results to determine if a change, corrective action, or preventive action is necessary

For the following description, state: - the name - the abbreviation - the formula: Description: The money spent on the work until a given point in time

Name Actual cost, or Actual cost of work completed Abbreviation AC, or ACWP Formula The sum of all the costs incurred until a given point in time.

For the following description, state: - the name - the abbreviation - the formula: Description: Total planned cost

Name Budget at completion Abbreviation BAC Formula None - it is the approved budget

For the following description, state: - the name - the abbreviation - the formula: Description: The work performed per actual cost

Name Cost performance index Abbreviation CPI Formula CPI = EV / AC

For the following description, state: - the name - the abbreviation - the formula: Description: The difference between what you planned to spend and what is actually spent until a given point in time

Name Cost variance Abbreviation CV Formula CV = EV - AC

For the following description, state: - the name - the abbreviation - the formula: Description: Fraction of the completed work in terms of the planned budget at a given point in time

Name Earned value, or budgeted cost of work performed Abbreviation EV, or BCWP Formula EV = BAC x (work completed / total work required)

For the following description, state: - the name - the abbreviation - the formula: Description: Estimate of what will be spent on the whole project (or a project activity) based on the performance so far and the planned cost

Name Estimate at Completion Abbreviation EAC Formula EAC = ETC + AC

For the following description, state: - the name - the abbreviation - the formula: Description: Estimate of what will be spent on the remaining project (or a project activity) based on the performance so far and the planned cost

Name Estimate to Complete Abbreviation ETC Formula ETC = BAC - EV

For the following description, state: - the name - the abbreviation - the formula: Description: The fraction of work planned to be completed at a given point in time

Name Planned value, or budgeted cost of work scheduled Abbreviation PV, or BCWS Formula PV = BAC x (time passed / total schedule time)

For the following description, state: - the name - the abbreviation - the formula: Description: The actual work performed per planned work performed in terms of cost

Name Scehdule performance index Abbreviation SPI Formula SPI = EV / PV

For the following description, state: - the name - the abbreviation - the formula: Description: The difference between the work actually completed and the work planned to be completed at a given point in time

Name Schedule variance Abbreviation SV Formula SV = EV - PV

For the following description, state: - the name - the abbreviation - the formula: Description: Calculates the efficiency: remaining work per remaining funds

Name To-Complete Performance Index Abbreviation TCPI Formula (BAC - EV) / (BAC - AC)

For schedule performance analysis: PV = BAC x ??? SV = EV - ??? SPI = EV / ???

PV = BAC x (time passed / total schedule time) SV = EV - PV SPI = EV / PV

___ and ___ are the common inputs to controlling the scope, schedule, and cost. ___ and ___ are the common outputs of controlling the scope, schedule, and cost.

Performance measurement baselines and work performance data are the common inputs to controlling the scope, schedule, and cost. Work performance information and change requests are the common outputs of controlling the scope, schedule, and cost.

The cost management plan is an output of which: - process - knowledge area - process group

Plan Cost Management - cost management - planning

___, ___, and ___ are the three key parameters that need to be monitored closely in controlling costs. The rest of the earned value analysis is based on these three fundamental parameters.

Planned value (PV), earned value (EV), and actual cost (AC) are the three key parameters that need to be monitored closely in controlling costs. The rest of the earned value analysis is based on these three fundamental parameters.

What are the primary inputs and primary outputs of determining budget?

Primary Inputs 1. Collect information on basic work information - look at the scope baseline 2. Collect information about how to determine the budget - look at the cost management plan 3. Collect information on the cost estimates - look at the cost estimates to aggregate them into a total project budget - look at the basis of estimates for assumptions and constraints on the estimates 4. Look at business documents to determine financial success criteria - look at the business case to find info on financial success criteria - look at the benefits management plan on information about target benefits to consider when creating the project budget Primary Outputs 1. Cost baseline 2. Project funding requirements

Project cost management consists of developing a ___, estimating ___, determining a ___, and ___ costs.

Project cost management consists of developing a cost management plan, estimating costs, determining a budget, and controlling costs.

Project cost performance is measured by comparing the project results from ___ against the ___, i.e. the integrated composition of the scope baseline, schedule baseline, and cost baseline.

Project cost performance is measured by comparing the project results from work performance data against the performance measurement baseline, i.e. the integrated composition of the scope baseline, schedule baseline, and cost baseline.

Give the formula for Schedule Performance Index (SPI) Describe what it means when Schedule Performance Index (SPI) is: - Greater than 1.0 - Exactly 1.0 - Less than 1.0

Schedule Performance Index (SPI) SPI = EV / PV Greater than 1.0 = ahead of schedule Exactly 1.0 = on schedule Less than 1.0 = behind schedule

Give the formula for Schedule Variance (SV) Describe what it means when Schedule Variance (SV) is: - positive - neutral - negative

Schedule Variance (SV) SV = EV - PV Positive = ahead of schedule Neutral = on schedule Negative = behind schedule

The ___ document and ___ document are used to determine the project budget, which is the cost with a timeline attached to it.

The activity cost estimates and project schedule are used to determine the project budget, which is the cost with a timeline attached to it.

The approved budget minus the management reserve is called the ___

The approved budget minus the management reserve is called the cost baseline

The approved budget minus the management reserve is equal to what is called the ___.

The approved budget minus the management reserve is equal to what is called the cost baseline. - You can add the amount of management reserves to the cost baseline after it has been used.

Define Planned Value (PV) or Budgeted Cost for the Work Schedules (BCWS) + what is the formula?

The authorized cost for the scheduled work on a project or a project activity up to a given point on the timeline. PV is basically how much you were authorized to spend in the fraction of schedule time spent so far, as shown in the formula in image

The project budget includes the ___ costs, ___ reserve, and ___ reserve with a timeline

The budget includes the aggregated costs, contingency reserve, and management reserve with a timeline

Define schedule variance (SV) + What is the formula?

The deviation of the performed schedule from the planned schedule in terms of cost. It is calculated as the difference between EV and PV, as shown in image

Define Estimate at Completion (EAC) at the Present CPI + what is the standard formula? + performance is an integrated measure of progress in the areas of scope, schedule, and cost. This is why sometimes EAC is measured by taking into account both CPI (cost performance index) and SPI (schedule performance index). What is the formula for this?

The estimate made at the current point in time for how much it will cost to complete the whole project or a project activity from beginning to end. It is assumed that the future work will be performed at the current CPI Formula shown in top image - ETC (at current CPI) is also equal to (BAC-EV)/CPI When EAC takes into account both CPI and SPI, the formula in bottom image is used

Define Estimate to Complete (ETC) at the Present CPI + what is the formula?

The prediction about the expected cost to complete the remaining work at the present CPI.

Define Estimate to Complete (ETC) at Budgeted Rate + what is the formula?

The prediction about the expected cost to complete the remaining work for the project or for a project activity. - The future work is assumed to be completed at the budgeted rate. The value of the ETC is obtained by subtracting the earned value (EV) from the budget at completion (BAC), as shown in the formula in image

The project budget includes the ___ costs with timeline, ___ reserves, and ___ reserves; this composition also makes budgeting requirements.

The project budget includes the aggregated costs with timeline, contingency reserves, and management reserves; this composition also makes budgeting requirements.

The project ___, project ___ management plan, and project ___ management plan are used to develop the project cost management plan.

The project charter, project schedule management plan, and project risk management plan are used to develop the project cost management plan.

Define schedule performance index (SPI) + what is the formula?

The ratio of the EV to the PV A measure of schedule efficiency expressed as the ratio of earned value to planned value. It measures how efficiently the project team is accomplishing the work An SPI value less than 1.0 indicates less work was completed than was planned. An SPI greater than 1.0 indicates that more work was completed than was planned For example, if earned value is $20,000 and planned value so far is $10,000, then the SPI would be 2. - this means that the project is progressing at twice the speed of the planned pace, which is good.

The ___ baseline, ___ baseline, and ___ requirements are the main inputs to make cost estimates for activities, which are aggregated to determine the ___.

The scope baseline, schedule baseline, and resource requirements are the main inputs to make cost estimates for activities, which are aggregated to determine the project budget

The three project parameters— ___, ___, and ___ —form a triple constraint, which means if one of these three parameters changes, at least one of the other two must change

The three project parameters—cost, schedule, and scope—form a triple constraint, which means if one of these three parameters changes, at least one of the other two must change

Define project budget

The time-phased project cost obtained by aggregating the individual activity costs.

Define actual cost (AC) or Actual Cost of Work Performed (ACWP)

The total cost actually incurred performing the work for a project until a specific point on the timeline. This cost is to be compared with the earned value to calculate the cost variance and cost performance.

Define earned value (EV) or Budgeted Cost of Work Performed (BCWP) + what is the formula for EV?

The value of the actually performed work expressed in terms of the approved budget for a project or a project activity for a given time period. - In this variable, you see the relationship of schedule (work) and cost in action. BAC represents the total value of the project. But when you perform only some work on the project, you have earned only some of that total value, and the earned value is proportional to the fraction of the total work performed, as shown by the formula in image:

Define To-Complete Performance Index (TCPI) + what is the formula for TCPI if the goal it to complete the project within BAC? + what is the formula for TCPI is BAC is not attainable, therefore the goal is to complete the project within the estimate at completion (EAC) cost currently predicted?

The variable used to predict the future performance needed to finish the work according to a specified goal; for example, either within the planned budget (BAC) or at the completion cost currently predicted (EAC). If the goal is to complete it within BAC, it is calculated as the ratio of the remaining work to the remaining budget, as shown in the formula in top image: If it is realized that BAC is not attainable, then it is replaced with EAC. Then, the formula will be given in bottom image

Give the 2 formulas for To-Complete Performance Index (TCPI) Describe what it means when To-Complete Performance Index (TCPI) (for both formulas) is: - Greater than 1.0 - Exactly 1.0 - Less than 1.0

To-Complete Performance Index (TCPI) The efficiency that must be maintained in order to complete on plan: TCPI = (BAC - EV) / (BAC - AC) Greater than 1.0 = harder to complete Exactly 1.0 = same difficulty to complete Less than 1.0 = easier to complete The efficiency that must be maintained in order to complete the current EAC: TCPI = (BAC - EV) / (EAC - AC) Greater than 1.0 = harder to complete Exactly 1.0 = same difficulty to complete Less than 1.0 = easier to complete

True or False: It is possible for CV and SV to run in opposite directions—for example, CV has a positive value when SV has a negative value.

True

True or False: Total planned value (PV) of the project is the same as the budget at completion (BAC)

True

Two common input items to controlling scope, schedule, and cost are ___ and the ___. In all three processes, we perform performance measurement analysis, using some tools and techniques to generate ___, a common output item of these three processes

Two common input items to controlling scope, schedule, and cost are work performance data and the performance measurement baseline. In all three processes, we perform performance measurement analysis, using some tools and techniques to generate work performance information, a common output item of these three processes

Assume you are a project manager for the construction of a 16-mile road. Further assume that the work is uniformly distributed over 12 weeks. The total approved budget for this project is $600,000. At the end of the first four weeks of work, $125,000 has been spent, and four miles of road has been completed. What is the EAC, taking into account both present CPI and SPI?

Using the formula shown in image: BAC = $600,000 EV = BAC x (work completed / total work required) EV = $600,000 x (4 miles/16 miles) = $150,000 AC = $125,000 CPI = EV/AC CPI = $150,000 / $125,000 = 1.2 SPI = EV/PV SPI = $150,000 / $200,000 SPI = 0.75 EAC = $625,000

Define variance

Variance A measurable deviation in the value of a project variable or parameter such as cost or schedule from a known baseline or expected value.

Give the formula for Variance at Completion (VAC) Describe what it means when Variance at Completion (VAC) is: - positive - neutral - negative

Variance at Completion (VAC) VAC = BAC - EAC Positive = under planned cost Neutral = on planned cost Negative = over planned cost

You use the ___ document as the foundation to estimate the monetary resources needed to complete the project activities.

You use the scope baseline document as the foundation to estimate the monetary resources needed to complete the project activities.

Your project is in the planning stage. You first want to make the cost estimates for the planned project activities, and then you want to aggregate those costs. Which process will you perform first? a. Determine Budget b. Plan Resource Management c. Estimate Costs d. Plan Cost Management

b. Plan Resource Management

Describe how decision making is relevant to estimating costs

it is a tool/technique that allows you to choose one cost estimation path when many are available.

Complete the following inputs to estimating costs 1. Collect ___ Information - costs are associated with project activities. Therefore, you need the ___ to ensure all the needed information is accounted for when estimating costs. All 3 components of this document help with estimating costs. - the ___ will provide the cost-relevant information, such as project- and product-acceptance criteria, assumptions and constraints, product scope description, and project boundaries around the scope - the ___ is useful by providing the relationships of project deliverables to different work components - the ___ will provide the identification and description of the work 2. Collect ___ Information - The ___ will give you the required information about the resources needed along the timeline to complete the project work. This is crucial in making the cost estimates as it yields information about the type, amount, and time window of both team and physical resources. - the ___ document, generated by the Estimate Activity Resources process, provides detailed information about scheduled resources, such as identification, type, quantity, and so forth - the ___ contains quality-related resource information, as it describes the activities and the resources needed to perform quality activities - the ___ contains information on threats and opportunities that have an impact on cost in the form of risk-mitigation costs and revenues or savings from the opportunities. 3. Collect Information to Facilitate the Process - the ___ can be used as a guide on how to perform the Estimate Cost process; e.g.; methods, units, and precision level to use - the ___ can be used to Record your experience of estimating the cost; e.g.; which technique works the best, for subsequent use to improve the efficiency and effectiveness of cost estimating.

1. Collect Basic Work Information - costs are associated with project activities. Therefore, you need the scope baseline to ensure all the needed information is accounted for when estimating costs. All 3 components of this document help with estimating costs. - the scope statement will provide the cost-relevant information, such as project- and product-acceptance criteria, assumptions and constraints, product scope description, and project boundaries around the scope - the WBS is useful by providing the relationships of project deliverables to different work components - the WBS dictionary will provide the identification and description of the work 2. Collect Resource Information - The schedule baseline (i.e. approved project schedule) will give you the required information about the resources needed along the timeline to complete the project work. This is crucial in making the cost estimates as it yields information about the type, amount, and time window of both team and physical resources. - the resource requirements document, generated by the Estimate Activity Resources process, provides detailed information about scheduled resources, such as identification, type, quantity, and so forth - the quality management plan contains quality-related resource information, as it describes the activities and the resources needed to perform quality activities - the risk register contains information on threats and opportunities that have an impact on cost in the form of risk-mitigation costs and revenues or savings from the opportunities. 3. Collect Information to Facilitate the Process - the cost management plan can be used as a guide on how to perform the Estimate Cost process; e.g.; methods, units, and precision level to use - the lessons learned register can be used to Record your experience of estimating the cost; e.g.; which technique works the best, for subsequent use to improve the efficiency and effectiveness of cost estimating.

Complete the following inputs to controlling costs 1. From the ___, get information on how to control costs. Apply this information to the following steps. 2. Get information on cost results from project execution in the ___.

1. From the cost management plan, get information on how to control costs. Apply this information to the following steps. 2. Get information on cost results from project execution in the work performance data.

State the 4 Main Processes of Project Cost Management

1. Planning Cost Management The process used to develop the cost management plan, which is used to document how to estimate and control costs. 2. Estimating Costs The process used to approximate the finances needed to complete project activities. 3. Determining Budget The process used to aggregate the costs of individual activities to generate the cost baseline. 4. Controlling Costs The process used to monitor project costs and manage changes to the cost baseline or project actitivies/processes to keep costs aligned with the baseline.

After gathering inputs for planning cost management, complete the following steps in performing this process: 1. Use data analysis techniques such as ___ to choose one option out of many available - e.g.; to choose which funding option would be better or best: loan, self-funding, or funding with equity; or whether to make, buy, or rent a project-related item. 2. Use ___ where needed on cost management- related topics, such as cost estimate, cost control, and budgeting. - gain valuable information from subject-matter experts 3. Put all the information collected together into the ___ document. - To facilitate this, you can hold ___ with relevant stakeholders, such as the sponsor, needed team members, and anybody who has project cost-related responsibilities.

1. Use data analysis techniques such as alternative analysis to choose one option out of many available - e.g.; to choose which funding option would be better or best: loan, self-funding, or funding with equity; or whether to make, buy, or rent a project-related item. 2. Use expert judgment where needed on cost management- related topics, such as cost estimate, cost control, and budgeting - gain valuable information from subject-matter experts 3. Put all the information collected together into the cost management plan document. - To facilitate this, you can hold meetings with relevant stakeholders, such as the sponsor, needed team members, and anybody who has project cost-related responsibilities.

Define cost variance (CV) + what is the formula?

A measure of cost performance in terms of the deviation of reality from the plan - it is obtained by subtracting the actual cost (AC) from the earned value (EV), as shown in the formula in image The expected value of CV is zero because we expect the earned value to be equal to the actual cost. - A positive result indicates better cost performance - A negative result indicates worse cost performance than expected E.g. if the earned value of the work performed so far is $50,000 and the actual cost is $70,000, you would have a CV of -$20,000, which means there is more cost incurred than planned and therefore changes could be made.

Determining Budget State the: - Definition - Knowledge Area - Process Group - When it is performed - Major Outputs

Definition The process used to aggregate the costs of individual activities to generate the cost baseline. Knowledge Area Cost management Process Group Planning When it is performed Once/at predefined points in the project. Major Outputs 1. Cost baseline 2. Project funding requirement

After gathering the inputs for controlling costs, complete the following steps in performing this process: Compare the cost results from project execution in the ___ with the ___ by using ___analysis. If deviations pass the threshold, create needed ___. Perform an ___ analysis by comparing the project execution results in the ___ against the performance measurement baseline. This comparison may generate ___ Based on these comparisons, perform a ___analysis. This will generate the ___ The results from the preceding steps will create ___. Like in many other processes, use the ___ to record and subsequently use the lessons learned to improve the process.

Compare the cost results from project execution in the work performance data with the cost baseline by using variance analysis. If deviations pass the threshold, create needed change requests. Perform an earned value analysis by comparing the project execution results in the work performance data against the performance measurement baseline. This comparison may generate change requests Based on these comparisons, perform a trend analysis. This will generate the cost forecast. The results from the preceding steps will create work performance information Like in many other processes, use the lessons learned register to record and subsequently use the lessons learned to improve the process.

Describe the different between management reserve and contingency reserve

Contingency reserves Funds that can be used to deal with the unplanned events that can potentially transpire—e.g.; in case one or more identified risks occur - reserves to known unknowns Management reserves Funds that can be used in the case of unplanned changes that are within the project scope but were missed during planning. - reserves for unknown unknowns

State the process, knowledge area, and process group: Inputs 1. Project Management Plan: • Cost management plan • Cost baseline • Performance measurement baseline 2. Project funding requirement 3. Work performance data 4. Project documents • Lessons learned register 5. Organizational project assets Tools/Techniques 1. Earned value analysis 2. Variance analysis 3. Trend analysis 4. Reserve analysis 5. To-complete performance index 6. Project management information system Outputs 1. Work performance information 2. Cost forecasts 3. Change requests 4. Plan updates • Cost management plan • Cost baseline • Performance measurement baseline 5. Updates to project documents • Cost estimates • Basis of estimate • Assumptions log • Risk register • Lessons learned register

Control Costs - cost management - monitor and control

Estimating Costs State the: - Definition - Knowledge Area - Process Group - When it is performed - Major Outputs

Definition The process used to approximate the finances needed to complete project activities. Knowledge Area Cost management Process Group Planning When it is performed Periodically throughout the project Major Outputs 1. Activity cost estimates 2. Basis of estimates

Planning Cost Management State the: - Definition - Knowledge Area - Process Group - When it is performed - Major Outputs

Definition The process used to develop the cost management plan, which is used to document how to estimate and control costs. Knowledge Area Cost management Process Group Planning When it is performed Once/at predefined points in the project Major Outputs 1. Cost management plan

Controlling Costs State the: - Definition - Knowledge Area - Process Group - When it is performed - Major Outputs

Definition The process used to monitor project costs and manage changes to the cost baseline or project actitivies/processes to keep costs aligned with the baseline. Knowledge Area Cost management Process Group Monitoring and controlling When it is performed Throughout the project Major Outputs 1. Work performance information 2. Budget forecasts 3. Change requests

After gathering inputs for estimating costs, complete the steps to perform this process: Convert Cost-Related Information into ___ - use ___ to estimate costs based on similar components and activities from previous projects. - use ___ to estimate costs based on parameters and statistical relationships - use ___ to estimate costs by aggregating the costs of individual parts to calculate the cost of the whole component - use ___ to determine funds needed for known risks - use ___ to choose one or a few out of many available options of different cost estimation methods - use ___ to take one cost estimating path when many are available - use ___ to facilitate multiple and alternative methods of estimating costs by using software such as spreadsheets, simulations, statistical cost analysis, graphics, etc. - use ___ to determine the costs of implementing the conformance to planned quality objectives and the costs of nonconformance - use ___ to estimate costs based on a combination of a most-likely cost estimate, an optimistic cost estimate, and a pessimistic cost estimate

Convert Cost-Related Information into Cost Estimates - use analogous estimation to estimate costs based on similar components and activities from previous projects. - use parametric estimation to estimate costs based on parameters and statistical relationships - use bottom-up estimation to estimate costs by aggregating the costs of individual parts to calculate the cost of the whole component - use contingency reserve analysis to determine funds needed for known risks - use alternatives analysis to choose one or a few out of many available options of different cost estimation methods - use decision making to choose one cost estimating path when many are available - use PMIS to facilitate multiple and alternative methods of estimating costs by using software such as spreadsheets, simulations, statistical cost analysis, graphics, etc. - use cost of quality to determine the costs of implementing the conformance to planned quality objectives and the costs of nonconformance - use three-point estimation to estimate costs based on a combination of a most-likely cost estimate, an optimistic cost estimate, and a pessimistic cost estimate

Distinguish between cost and budget

Cost The value of the inputs that have been (or will be) used up to perform a task or to produce a project outcome: product, service, or result. - must be paid by the performing organization for resources - e.g. you paid two programmers $1,000 each for developing a software program, and you paid $100 to a tester to test the program. So, the cost for the task of developing and testing the software program is $2,100. Budget Aggregated cost with a timeline. - You aggregate the costs of all the resources needed to perform the project and put a timeline on it: the availability of funds over time. This is called the budget

Cost management contains the Plan Cost Management process to generate a cost management plan according to which all the three other processes are performed. The ___ process generates the output items cost estimate and basis of estimates, which are used by the ___ process to generate a cost baseline and project funding requirements, which are used in the ___ process to monitor costs and control deviations in cost from the baseline.

Cost management contains the Plan Cost Management process to generate a cost management plan according to which all the three other processes are performed. The Estimate Costs process generates the output items cost estimate and basis of estimates, which are used by the Determine Budget process to generate a cost baseline and project funding requirements, which are used in the Control Costs process to monitor costs and control deviations in cost from the baseline.

State the document that follows this format: Choice of Processes - whether cost estimation and budgeting will be performed as one process or two separate processes Cost Measurements: Units, Precision, Accuracy - What are unit systems of measurement? For example, U.S. dollar, pound, Euro. - What is the precision level? e.g.; rounding off to nearest whole number corresponds to an error of ±0.5. For example, $19.40 would round off to $19.00, and $19.60 to $20.00. - What is the accuracy level? This refers to approximation errors; e.g.; if the cost is estimated to be $100 with an accuracy of ±20%, it means that cost could be any amount from $80 to $120. WBS Usage - this document may suggest using the control account in the WBS consistently for cost estimating, budgeting, and cost controlling. - the control account points may be defined inside the WBS How to Measure Performance

Cost management plan

Define cost performance Define budget at completion (BAC)

Cost performance Refers to how efficiently you are spending money on the project work, measured against the expectations set in the project management plan—that is, the cost baseline. Budget at completion (BAC) The total budget authorized for performing the project work, also called the planned budget. - In other words, it is the cost originally estimated in the project management plan. - represents the total value of the project

Describe how variance analysis is relevant to controlling costs

It is a tool/technique used to assess the magnitude of the variation in the value of a variable, such as cost, from the baseline or expected value, determine the cause of the variance, and decide whether a corrective action is required.

State the process, knowledge area, and process group: Inputs 1. Project Management Plan: • Cost management plan • Resource management plan 2. Scope baseline 3. Project documents: • Cost estimates • Basis of estimates • Project schedule • Risk register 4. Business documents: • Business case • Benefit management plan 5. Agreements 6. Enterprise environmental factors 7. Organizational project assets Tools/Techniques 1. Cost aggregation 2. Reserve analysis 3. Historical information review 4. Reconciliation of funding limits 5. Financing 6. Expert judgment Outputs 1. Cost baseline 2. Project funding requirements 3. Updates to project documents • Cost estimates • Project schedule • Risk register

Determine Project Budget - cost management - planning

___ is the process of aggregating the cost estimates for all project activities and assigning a timeline to it.

Determining project budget is the process of aggregating the cost estimates for all project activities and assigning a timeline to it.

If BAC is $100,000, the EV is $25,000, and the CPI is 1.5. Calculate: - the ETC at budgeted rate - the ETC at present CPI

ETC at budgeted rate ETC = BAC - EV ETC = $100,000 - $25,000 ETC = $75,000 - this is the prediction about the expected cost remaining to complete the project, assuming that the remaining work will be completed at the budgeted rate ETC at present CPI ETC = (BAC - EV) / 1.5 ETC = $75,000 / 1.5 ETC = $50,000 - this is the prediction about the expected cost remaining to complete the project, assuming that the remaining work will be completed at the current CPI (cost performance index) - since the CPI is 1.5 (which is good, you are getting $1.50 worth of performance for every dollar spent), you are expected to complete the project at a lower cost than the predicted budgeted rate, assuming CPI stays the same.

State the process, knowledge area, and process group: Inputs 1. Project Management Plan: • Cost management plan • Quality management plan • Scope baseline 2. Project documents • Project schedule • Resource requirements • Risk register • Lessons learned register • Enterprise environmental factors • Organizational project assets Tools/Techniques 1. Analogous estimating 2. Bottom-up estimating 3. Parametric estimating 4. Three-point estimates 5. Data analysis: • Alternative analysis • Reserve analysis • Cost of quality 6. Decision making: Vote, etc. 7. Project management information system 8. Expert judgment Outputs 1. Cost estimates 2. Estimate bases 3. Updates to project documents: • Assumptions log • Risk register • Lessons learned register

Estimate Costs - cost management - planning

Which process is used to develop an estimate for the monetary resources needed to complete project work - that is, activities.

Estimating Project Costs

True or False: Cost is planned throughout the project.

False Cost is planned very early in the project; that is when the probability of influencing the project cost is at a maximum

Describe how cost aggregation is relevant to determining budget

It is a tool/technique used to calculate the cost of a whole by summing up the costs of the parts of which the whole—i.e., the project work—is made. You can use the bottom-up estimation technique in WBS to aggregate the costs of the all the components and activities to calculate the total cost of the project.

Describe how cost of quality is relevant to estimating costs

It is a tool/technique used to evaluate the costs of conformance to quality and the costs of nonconformance to quality.

Complete the following inputs for planning cost management From the ___, extract information about 1) preapproved financial resources from which you can develop the detailed cost; and 2) project requirements that will influence the cost management. 2. From the ___ management plan and ___ management plan, get information about which processes and controls may influence cost management, such as cost estimates. - e.g. scheduling restrictions and planned risk responses may influence cost estimates. 3. From ___, get information about the factors that can influence the development of the cost management plan, such as: - organizational structure and culture; - market conditions in terms of product availability globally and in different regions; - productivity differences of different regions, which will affect the cost of project work; - any relevant cost-related published data; currency exchange rates; - the project management information system to get information about different ways of managing costs 4. From the ___, get information about the factors that can influence the development of the cost management plan, such as: - organizational policies and procedures regarding cost estimates and budgeting and financial control—e.g.; account code, time reporting, standard contract provisions, etc., - historical information from lessons learned from past projects

From the project charter, extract information about 1) preapproved financial resources from which you can develop the detailed cost; and 2) project requirements that will influence the cost management. 2. From the schedule management plan and risk management plan, get information about which processes and controls may influence cost management, such as cost estimates. - e.g. scheduling restrictions and planned risk responses may influence cost estimates. 3. From enterprise environmental factors, get information about the factors that can influence the development of the cost management plan, such as: - organizational structure and culture; - market conditions in terms of product availability globally and in different regions; - productivity differences of different regions, which will affect the cost of project work; - any relevant cost-related published data; currency exchange rates; - the project management information system to get information about different ways of managing costs 4. From the organizational project assets, get information about the factors that can influence the development of the cost management plan, such as: - organizational policies and procedures regarding cost estimates and budgeting and financial control—e.g.; account code, time reporting, standard contract provisions, etc., - historical information from lessons learned from past projects

In earned value analysis, all the performance variables (PV, EV, etc.) except ___ can be calculated at any given point in time

In earned value analysis, all the performance variables (PV, EV, etc.) except BAC can be calculated at any given point in time - this is because BAC is the cost of the entire budget, it does not change unless through an approved change request.

In earned value analysis, given the BAC, the ___ can be calculated at any point in time, even before the project execution starts.

In earned value analysis, given the BAC, the PV can be calculated at any point in time. Total PV = BAC Therefore, at any given time period in the project, you can find the PV: PV = BAC x (time period / total schedule time) For example, if BAC is $100,000, the total project time is 10 weeks, and you want to find the PV for the first 2 weeks, you can easily find it: PV = $100,000 x (2 weeks / 10 weeks) = $20,000 PV for the first 2 weeks

In general, project progress or performance is measured by comparing the project execution results, in ___, against the ___, which is an approved integrated plan for scope, schedule, and cost for the project. Important relevant components of this integrated plan are the ___ baseline, ___ baseline, and ___ baseline

In general, project progress or performance is measured by comparing the project execution results, in work performance data, against the performance measurement baseline, which is an approved integrated plan for scope, schedule, and cost for the project. Important relevant components of this integrated plan are the scope baseline, schedule baseline, and cost baseline

How is PMIS relevant to estimating costs

It is a tool/technique used to facilitate multiple alternative methods to estimate cost; e.g.; spreadsheet, simulations, statistical cost analysis, and graphics

Describe how three-point estimation is relevant to estimating costs

It is a tool/technique used to make cost estimates based on a most-likely scenario, an optimistic scenario, and a pessimistic scenario.

Describe how funding limit reconciliation is relevant to determining budget

It is a tool/technique where the expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. The reconciliation may require rescheduling some activities, hence updating the project schedule documents

Describe how the cost management plan is related to controlling costs

It is an input that describes how the project costs will be managed and controlled.

Monitoring and controlling project costs include the following: ___ the factors that can create changes to the approved cost baseline. Monitor the following: • ___ performed against the funds expended • Variance of cost performance from the ___ Prevent ___ changes from creeping into implementation, expenditures, and cost reports. Act to keep cost overruns within the planned ___. Ensure the following: • ___ are dealt with in a timely fashion and managed as they occur. • Expenditures do not exceed the ___; that is, by period and by total amount. Any change to it must be approved before implementation. Communicate with the ___ about the cost associated with the approved changes.

Influence the factors that can create changes to the approved cost baseline. Monitor the following: • Work performed against the funds expended • Variance of cost performance from the approved baseline Prevent unapproved changes from creeping into implementation, expenditures, and cost reports. Act to keep cost overruns within the planned acceptable limits. Ensure the following: • Change requests are dealt with in a timely fashion and managed as they occur. • Expenditures do not exceed the approved budget; that is, by period and by total amount. Any change to it must be approved before implementation. Communicate with the appropriate stakeholders about the cost associated with the approved changes.

Describe how the cost management plan is related to planning cost management

It is a component of the project management plan that serves as a guide on how to manage project costs, including estimating costs, determining budget, and monitoring and controlling costs. It is an output of planning cost management

Describe how historical information review is relevant to determining budget

It is a tool/technique in which historical information may be used as parameters for analogous estimates and parametric estimates. Models can be built based on these methods to estimate the total cost of the project. - The accuracy and reliability of these models depend on the accuracy of the historic parameter information

Describe how forecasting is relevant to controlling costs

It is a tool/technique that allows you to predict some information about the project in the future based on its performance in the past.

Describe how earned value technique (EVT), also called earned value management (EVM) or earned value analysis (EVA), is relevant to controlling costs + What are the 3 dimensions of EVT/EVM/EVA?

It is a tool/technique that compares the performance measurement baseline to the actual schedule and cost performance. EVM integrates the scope baseline with the cost baseline and schedule baseline to form the performance measurement baseline. EVM develops and monitors three key dimensions for each work package and control account: Planned value (PV) The authorized budget assigned to scheduled work. - It is the authorized budget planned for the work to be accomplished for an activity or work breakdown structure (WBS) component, not including management reserve. - This budget is allocated by phase over the life of the project, but at a given point in time, planned value defines the physical work that should have been accomplished - The total of the PV is sometimes referred to as the performance measurement baseline (PMB). - The total planned value for the project is also known as budget at completion (BAC) Earned value (EV) A measure of work performed expressed in terms of the budget authorized for that work. - It is the budget associated with the authorized work that has been completed. - The EV measured cannot be greater than the authorized PV budget for a component. - The EV is often used to calculate the percent complete of a project. Actual cost (AC) The realized cost incurred for the work performed on an activity during a specific time period - It is the total cost incurred in accomplishing the work that the EV measured - The AC will have no upper limit; whatever is spent to achieve the EV will be measured

Describe how analogous estimation is relevant to estimating costs

It is a tool/technique that evaluates cost-related variables—such as rate, cost of a component, or cost of an activity—from similar components and activities in previous projects, or the cost of a similar project from the past, to estimate the same variable in the current project. This technique is useful when very limited component information is available, especially in the beginning of a project, and is usually used for estimating the gross values and not the detailed component-based values. It's generally less costly and less time consuming than other techniques, but also less accurate

Describe how bottom-up estimation is relevant to estimating costs

It is a tool/technique that involves estimating the cost of the parts of a component and then aggregating the costs of those parts to calculate the cost of the whole component. By continuing the process, we can aggregate the costs of multiple components and eventually get the cost of the whole project. This technique can generate accurate results when you can generally make a better estimate of a part than the whole, which is usually the case when enough information is available.

Describe how reserve analysis is relevant to determining project budget

It is a tool/technique that prepares a management reserve on the budget level, in addition to contingency cost reserves that have already been made during the estimate costs process.

Describe how parametric estimation is relevant to estimating costs

It is a tool/technique that uses some parameters and the statistical relationships among them to make the cost estimate. This technique can generate quite accurate results depending on the accuracy of the quantity of resources and other data that goes into the estimation. For example, if the unit cost is known, say, from historical data, the cost of the whole package containing a number of units can be calculated. - if there are ten identical or similar activities in a work package and it is known that one activity costs $100, then we can say that the whole work package will cost $1,000

What is the difference between PV and BAC?

PV (planned value) is the authorized cost for scheduled work at a given point in time. - for example, PV for a project 1 week in could be $2,000. After 4 weeks, it could be $8,000. After 8 weeks, which is the end of the project, it could be $16,000. BAC (budget at completion) is the total PV - in the example, BAC would be $16,000, which is the total PV of the project.

An activity cost estimate goes like this: It will take 20 hours of a programmer to write this program. The average rate to hire a programmer is $50 per hour. Therefore, the cost of writing this program, assuming that everything else needed to write the program, such as a computer, is in place, is 20 x $50 = $1,000. What kind of estimation technique is at work here?

Parametric estimating

State the process, knowledge area, and process group: Inputs 1. Project charter 2. Project Management Plan: • Schedule management plan • Risk management plan 3. Enterprise environmental factors 4. Organizational project assets Tools/Techniques 1. Data analysis 2. Expert judgment 3. Meetings Outputs 1. Cost management plan

Plan Cost Management - cost management - planning

What are the primary inputs and primary outputs of estimating costs?

Primary Inputs 1. Collect Basic Work Information - use the scope baseline (scope statement, WBS, and WBS dictionary) 2. Collect Resource Information - use the schedule baseline (approved project schedule) to obtain info on the resources needed along the timeline to complete project work. - look at the resource requirements documentation for detailed info on schedule resources - look at the quality management plan to see activities and resources needed to meet quality objectives, as these will be costs as well - look at the risk register for threats and opportunities that would impact costs 3. Collect Info to Facilitate the Process - look at the cost management plan as a guide on how to perform the estimate costs process (e.g. methods, units, precision level) - look at the lessons learned register to record your experience of estimating costs (e.g. which technique works best) for subsequent use. Primary Outputs 1. Cost estimates 2. Basis of estimates

State the primary inputs and primary outputs of planning cost management

Primary Inputs 1. Gain info from the project charter - about preapproved financial resources, and general project requirements that will influence cost management 2. Obtain information about which processes and controls may influence cost management - get this info from the schedule management plan and the risk management plan - e.g. scheduling restrictions or risk responses may influence cost estimates Primary Outputs 1. Cost management plan

What are the primary inputs and primary outputs of controlling costs?

Primary Inputs 1. Obtain information on the "how" - look at the cost management plan to know how to control costs 2. Obtain information on cost results from work performance data and obtain the cost baseline - you will look at the work performance data and compare the cost results with the cost baseline using variance analysis Primary Outputs 1. Work performance information 2. Cost forecasts 3. Change requests

Know the difference between the project budget, cost baseline, funding requirements, and expenditures

Project budget Cost baseline + management reserve Cost baseline The anticipated expenditures + anticipated liabilities Funding requirements The amount of funding the project needs to obtain to account for costs stated in the cost baseline. Often occurs in incremental amounts and may not be evenly distributed (e.g. quarertly funding, annual funding) Expenditures The actual spending of the project. Actual expenditures should be monitored and controlled so as to not exceed the cost baseline

Define Estimate at Completion (EAC) at the Budgeted Rate + what is the formula

The estimate made at the current point in time for how much it will cost to complete the whole project or a project activity from beginning to end. - It is assumed that the future work will be performed at the budgeted rate. - the value of the EAC is obtained by adding the value of ETC at budgeted rate to AC, as shown in the formula in image For example, if your ETC (estimate to complete at budgeted rate) is $300,000, and your actual cost is $100,000. Then your estimate at completion is $400,000.

The intrinsic relationship between scope, schedule, and cost is called the ___ constraint.

The intrinsic relationship between scope, schedule, and cost is called the triple constraint.

Define cost performance index (CPI) + What is the formula?

The ratio of the EV to the AC (shown in image) It is a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost. It is considered the most critical EVA metric and measures the cost efficiency for the work completed A CPI value of less than 1.0 indicates a cost overrun for work completed. A CPI value greater than 1.0 indicates a cost underrun of performance to date For example, if earned value is $150,000 and actual cost is $120,000, the CPI is 1.2 - this means you are getting $1.20 worth of performance for every dollar spent. - A value of CPI greater than one indicates good performance - a value less than one indicates bad performance. - The expected value of CPI is one

Describe how contingency reserve analysis is relevant to estimating costs

There are two problems associated with cost estimates: 1. Estimates are approximations, and approximations imply uncertainty, which means risk. 2. There may be risks not yet identified at the time of making estimates; i.e., cost amount is unknown The contingency reserve, in general, is an amount of a resource, such as funds, time, and so forth, allocated in addition to the calculated estimates so as to reduce the risk arising from various sources. - e.g. risk arising from overruns of project objectives to a level acceptable to the performing organization because there was known uncertainty in estimating the cost of a few components. In other words, the contingency reserves are the funds reserved to deal with the events that are anticipated but not certain: known risk with unknown cost it is relevant because you need to account for contingency reserves in your cost estimates for risks.

In a cost management plan, you usually specify the cost measurements in terms of units, precision, and accuracy. Describe these terms for cost planning

Units What are unit systems of measurement? - For example, U.S. dollar, pound, Euro, or Indian rupees for money; miles or kilometers for distance; and pounds or kilograms for mass, commonly called weight. Precision This refers to the rounding-off error; - e.g.; rounding off to nearest whole number corresponds to an error of ±0.5. - For example, $19.40 would round off to $19.00, and $19.60 to $20.00. Accuracy This refers to approximation errors - e.g.; if the cost is estimated to be $100 with an accuracy of ±20%, it means that cost could be any amount from $80 to $120.