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43 terms

Chapter 7

STUDY
PLAY
cost overrun
is the additional percentage or dollar amount by which actual costs exceed estimates.
Baseline
the original project plan plus approved changes
Bottom-up estimates
A cost estimating technique based on estimating individual work items and summing them to get a total for the project. The drawback with ________ is that they are usually time-intensive and therefore expensive to develop.
Budget at completion (BAC)
the original total budget for a project
Cash flow analyses
a method for determining the estimated annual cost and benefits for a project
Contingency reserves
dollars included in a cost estimate to allow for future situations that may be partially bland for (sometimes called unknown unknowns) and are included in the project cost baseline
Cost
___________is a resource sacrificed or forgone to achieve a specific objective or something given up to achieve an exchange .
Cost baseline
a time-phased budget that project managers use to measure and monitor cost performance
cost budgeting
processes of project cost management involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance
cost control main outputs
are work performance measurements, budget forecasts, organizational process asset updates, change requests, project management plan updates, and project document updates.
cost estimating
process of project cost management involves developing an approximation of the costs of the resources needed to complete a project
Cost performance Index (CPI)
the ratio of earned value to actual costs can be used to estimate the projected costs to complete the project. CPI less than 100, the project is over budget
Cost variance (CV)
the current value minus the actual costs
Definitive estimate
A cost estimate that provides an accurate estimate of the project costs. Used for making purchasing decisions and estimating the final project cost.
Direct costs
costs that can be directly related to producing the products and services of the project
Earned value (EV)
an estimate of the value of the physical work actually completed
Earned value analysis(EVA)
A project performance measurement technique that integrates scope, time, and cost data. Same as Earned Value Management.
Earned value management (EVM)
A project performance measurement technique that estimates scope time and cost data. Same as Earned Value Analysis
Estimate at completion (EAC)
an estimate of what it will cost to complete the project based on performance to date
Estimating costs
developing an approximation or estimate of the costs of the resources needed to complete the project
If a company loses five dollars for every $100 in revenue for a certain product, what is the profit margin for that product?
-5%
if a project is halfway completed and it's scheduled performance index is 110% and its cost performance in index is 95% how is it progressing?
It is ahead of schedule and over budget
If the actual costs for a WBS item is $1500 and its earned value was $2000 what is its costs variance and is it under or over budget?
the cost variance is $500 which is under budget
Indirect costs
costs that are not directly related to the products or services of the project, but are indirectly related to performing the project
Intangible costs
often include items like goodwill, prestige, and general statements of improved productivity that an organization cannot easily translate into dollar amounts.
Known unknowns
dollars included in a cost estimate to allow for future situations that may be partially planned for (sometimes called contingency reserves) and are included in the project cost baseline
Lifecycle costing
Involves allocating the project cost estimate to individual work items over time. Considers the total cost of ownership; development plus support costs
Management reserves
dollars included in a cost estimate to allow for future situations that are unpredictable (sometimes called unknown unknowns)
Overrun
the additional percentage or dollar amount by which actual cost exceeds estimates
parametric model
Might provide an estimate of $50 per line of code for a software development project based on the programming language the project is using, the level of expertise of the programmers, the size and complexity of the data involved, and so on.
Planned value (PV)
That portion of the approved total cost estimate planned to be spent on an activity during a given period. Suppose a project included a summary activity of purchasing and installing a new Web server. Suppose further that, according to the plan, it would take one week and cost a total of $10,000 for the labor hours, hardware, and software involved. The ________ for that activity that week is, therefore, $10,000.
Profit margin
the ratio between revenues and profits
profits
To increase ________, a company can increase revenues, decrease expenses, or try to do both.
Project cost management
the processes required to ensure that the project is completed within the approved budget
Rate of performance (RP)
the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity.
Rough order of magnitude estimate (ROM)
Type of cost estimate prepared very early in the life of a project to provide a rough idea of what the project will cost
Schedule performance Index (SPI)
the ratio of earned value to planned value; can be used to estimate the protected time to complete a project. SPI less than 100% mean the project is behind schedule.
Schedule variance (SV)
the earned value minus the planned value. SV less than 0 means the project took longer than planned.
sunk costs
To be avoided from consideration when deciding what project to invest in or continue.
Top-down estimates
A cost estimating technique that uses the actual costs of a previous, similar project as the basis for estimating the cost of current project, also called analogous estimates
Unknown unknowns
dollars included in a cost estimate to allow for future situations that are unpredictable (sometimes called management reserves)
What is the main goal of the project cost management
To provide truthful and accurate cost information on projects
You are preparing a cost estimate for a building based on its location, purpose, number of square feet, and other characteristics. What cost estimating techniques are you using?
Parametric