Information Technology Project Management 8th – Chapter 7

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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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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
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rate of performance (RP)
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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
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reserves
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Dollar amounts included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict
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rough order of magnitude (ROM) estimate
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A cost estimate prepared very early in the life of a project to provide a rough idea of what a project will cost
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schedule performance index (SPI)
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The ratio of earned value to planned value; can be used to estimate the projected time to complete a project
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schedule variance (SV)
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The earned value minus the planned value
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sunk cost
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Money that has been spent in the past
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tangible costs or benefits
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Costs or benefits that can be easily measured in dollars
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top-down 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 analogous estimates
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unknown unknowns
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Dollar amounts included in a cost estimate to allow for future situations that are unpredictable (sometimes called management reserves)

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