Chapter 7 – Cost Management – Flashcards
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Actual cost (AC)
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the total of direct and indirect costs incurred in accomplishing work on an activity during a given period
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Analogous estimates
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a cost-estimating technique that uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project; also called top-down estimates
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Baseline
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the original project plan plus approved changes
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Bottom-up estimates
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a cost-estimating technique based on estimating individual work items and summing them to get a project total
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Budget at completion (BAC)
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the original total budget for a project
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Budgetary estimate
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a cost estimate used to allocate money into an organization's budget
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Cash flow analysis
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A method for determining the estimated annual costs and benefits for a project
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Contingency reserves
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Dollar amounts included in a cost estimate to allow for future situations that may be partially planned for (sometimes called known unknowns) and that are included in the project cost baseline
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Cost baseline
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a time-phased budget that project managers use to measure and monitor cost performance
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Cost performance index (CPI)
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the ratio of earned value to actual cost; can be used to estimate the projected cost to complete the project
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Cost variance (CV)
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the earned value minus the actual cost
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Definitive estimate
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a cost estimate that provides an accurate estimate of project costs
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Direct costs
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Costs that can be directly related to creating the products and services of the project
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Earned value (EV)
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an estimate of the value of the physical work actually completed
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Earned value management (EVM)
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A project performance measurement technique that integrates scope, time, and cost data
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Estimate at completion (EAC)
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an estimate of what it will cost to complete the project based on performance to date
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Indirect costs
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Costs that are not directly related to the products or services of the project, but are indirectly related to performing the project
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Intangible costs or benefits
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Costs or benefits that are difficult to measure in monetary terms
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Known unknowns
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Dollar amounts included in a cost estimate to allow for future situations that may be partially planned for (sometimes called contingency reserves) and that are included in the project cost baseline
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Learning curve theory
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a theory that when many items are produced repetitively, the unit cost of those items normally decreases in a regular pattern as more units are produced
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Life cycle costing
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the total cost of ownership, or development plus support costs, for a project
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Management reserves
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Dollar amounts included in a cost estimate to allow for future situations that are unpredictable (sometimes called unknown unknowns)
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Overrun
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the additional percentage or dollar amount by which actual costs exceed estimates
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Parametric estimating
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A cost-estimating technique that uses project characteristics (parameters) in a mathematical model to estimate project costs
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Planned value (PV)
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the portion of the approved total cost estimate planned to be spent on an activity during a given period
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Profit margin
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the ratio between revenues and profits
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Profits
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Revenues minus expenses
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Project cost management
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the processes required to ensure that the project is completed within the approved budget
