FPM Week 7 - Project Cost and Resources

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Questions and Answers

What is the main objective of a Cost Management Plan?

To allocate resources

To develop and control the project budget (correct)

To manage project risks

To determine project quality standards

Which of the following is a unit of measure commonly used in cost management?

Stakeholder engagement

Earned Value

Dollars or staff hours (correct)

Milestones

What does the 'level of accuracy' in a cost estimate indicate?

The methodology used for estimating costs

The confidence level in the estimated value, typically expressed as a percentage range (correct)

The number of stakeholders involved

The project scope

What type of cost includes office rent, which remains constant regardless of the project size?

Fixed cost Signup and view all the answers

What are sunk costs?

Costs already spent that cannot be recovered Signup and view all the answers

Which of the following is an example of a direct cost?

Salaries of team members working exclusively on the project Signup and view all the answers

Which estimating approach uses data from similar past projects to estimate current project costs?

Analogous estimating Signup and view all the answers

Which estimating technique involves calculating cost by multiplying parameters like quantity by rate?

Parametric estimating Signup and view all the answers

What is a primary disadvantage of analogous estimating?

May be inaccurate if there is a lack of similar past projects Signup and view all the answers

In three-point estimating, what does 'cM' represent?

Most likely cost Signup and view all the answers

What is the formula for calculating the expected cost using the beta distribution in three-point estimating?

(cO + 4cM + cP) / 6 Signup and view all the answers

What type of estimate provides a cost range of -25% to +75% accuracy?

Rough Order of Magnitude (ROM) estimate Signup and view all the answers

When is a definitive estimate typically prepared?

Just before execution, after planning is complete Signup and view all the answers

What is the purpose of a cost baseline in project management?

To serve as the budget for measuring and controlling cost performance Signup and view all the answers

Which of the following is a time-phased budget used to monitor and control project costs?

Cost baseline Signup and view all the answers

What type of cost is associated with ongoing maintenance after the project's completion?

Operational cost Signup and view all the answers

What does Earned Value Management (EVM) help project managers measure?

Project performance and progress against the budget Signup and view all the answers

Which term refers to the amount of money added to a budget to cover known risks with active response strategies?

Contingency reserves Signup and view all the answers

What is a characteristic of management reserves?

Allocated for unforeseen work within the scope of the project Signup and view all the answers

Which type of estimating involves breaking down the project into smaller components and estimating each one individually?

Bottom-up estimating Signup and view all the answers

What is an advantage of using bottom-up estimating?

It provides a very accurate cost estimate Signup and view all the answers

Which estimating technique is most suitable when project details are not yet finalized?

Rough Order of Magnitude (ROM) estimating Signup and view all the answers

Which of the following describes opportunity cost?

The cost of an alternative that is forgone to pursue a certain action Signup and view all the answers

What is Parkinson’s Law in the context of project management?

Work expands to fill the time available for its completion Signup and view all the answers

Which type of cost estimating is described as 'involving a mathematical model to estimate project costs'?

Parametric estimating Signup and view all the answers

What is the primary purpose of the cost aggregation process?

To compile individual cost estimates into a total project cost Signup and view all the answers

Which of the following reserves is typically not part of the project cost baseline?

Management reserves Signup and view all the answers

What does the S-curve represent in project cost management?

Cumulative cost, labor hours, or quantities over time Signup and view all the answers

What is the definition of 'fixed cost'?

Costs that remain constant regardless of the size of the project Signup and view all the answers

In the context of cost estimating, what does 'level of precision' refer to?

The extent to which estimates are rounded (e.g., to the nearest thousand) Signup and view all the answers

What is a primary benefit of using historical databases in cost estimating?

It increases the accuracy of estimates by leveraging past project data Signup and view all the answers

What is the function of a cost baseline in project management?

To measure, monitor, and control overall project cost performance Signup and view all the answers

Which of the following tools helps manage cost performance throughout the project lifecycle?

Cost baseline Signup and view all the answers

In Agile, what is an item in the product backlog that estimates the effort required called?

User story Signup and view all the answers

What is the purpose of resource leveling?

To ensure resource demand does not exceed availability Signup and view all the answers

Which estimating approach can be done at any point during the project?

Parametric estimating Signup and view all the answers

What are indirect costs in project management?

Costs related to the general operation of the business, allocated to the project Signup and view all the answers

Which type of costs are constant and do not change with the project’s size or scope?

Fixed costs Signup and view all the answers

What is the main risk of using top-down (analogous) estimating?

Inaccuracy if there is no historical data for comparison Signup and view all the answers

Which type of estimate is used to put dollars in the budget plan during early to mid-planning?

Budgetary estimate Signup and view all the answers

Which type of estimate is typically the most accurate?

Bottom-up estimate Signup and view all the answers

What is 'cost aggregation' in project management?

Adding resource costs over time to create a cumulative total Signup and view all the answers

What role do contingency reserves play in the project budget?

Provide funding for unknown risks within the scope of the project Signup and view all the answers

What type of estimating is 'bottom-up estimating'?

A method that breaks down individual work activities to estimate total project cost Signup and view all the answers

Which estimating technique uses parameters like size, weight, or complexity as inputs to determine cost estimates?

Parametric estimating Signup and view all the answers

What does a cost baseline typically include?

Contingency reserves and work package estimates Signup and view all the answers

In resource planning, what type of resources must be considered?

People, equipment, facilities, and materials Signup and view all the answers

Which estimating method allows you to quickly compare items in a product backlog to each other to assign sizes?

Relative estimating Signup and view all the answers

What are 'control accounts' in project management?

Management control points where scope, budget, actual cost, and schedule are integrated Signup and view all the answers

What is the main purpose of the S-curve in project cost management?

To measure cumulative cost performance over time Signup and view all the answers

Study Notes

Cost Management Plan

Primary objective is to develop and control the project budget.

Units of Measure in Cost Management

Common measures include dollars or staff hours.

Level of Accuracy in Cost Estimates

Indicates confidence level in estimated value, expressed as a percentage range.

Types of Costs

Fixed costs: Remain constant regardless of project size (e.g., office rent).
Sunk costs: Already spent and cannot be recovered.
Direct costs: Attributable costs, such as salaries for team members exclusively working on the project.
Variable costs: Costs that vary with project parameters.

Estimating Techniques

Analogous estimating: Uses data from similar past projects for current costs.
Parametric estimating: Calculates costs by multiplying parameters (e.g., quantity by rate).
Three-point estimating: Uses optimistic, most likely, and pessimistic cost scenarios to derive expected cost.

Cost Estimates and Accuracy

Rough Order of Magnitude (ROM) estimate provides a cost range of -25% to +75% accuracy.
Definitive estimates are prepared just before execution after planning is complete.

Cost Baseline and Performance Measurement

Cost baseline serves as the budget to measure and control cost performance.
Earned Value Management (EVM) helps track project performance against the budget.

Reserves in Budgeting

Contingency reserves are for known risks with active response strategies.
Management reserves are for unforeseen work within the project scope.

Cost Aggregation

Primary purpose is to compile individual cost estimates into a total project cost.

S-Curve in Project Cost Management

Represents cumulative costs, labor hours, or quantities monitored over time.

Opportunity Cost

The cost of an alternative that is forgone to pursue a certain action.

Parkinson’s Law

Work expands to fill the time available for its completion.

Indirect Costs

Related to the general operation of the business, allocated to the project.

Bottom-Up Estimating

Involves breaking down the project into smaller components and estimating costs individually, providing a very accurate total project cost.

Resource Planning

Considers people, equipment, facilities, and materials as necessary resources.

Control Accounts

Management control points where scope, budget, actual cost, and schedule are integrated.

Agile Estimation

In Agile, user stories estimate the effort required for items in the product backlog.

Relative Estimating

Quickly compares items in a product backlog to assign sizes, aiding in project prioritization.

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Description

This quiz covers essential concepts of cost management in project management. Topics include units of measure, types of costs, estimating techniques, and accuracy levels in cost estimation. Understanding these principles is crucial for effective budget development and control.

FPM Week 7 - Project Cost and Resources

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Questions and Answers

What is the main objective of a Cost Management Plan?

Which of the following is a unit of measure commonly used in cost management?

What does the 'level of accuracy' in a cost estimate indicate?

What type of cost includes office rent, which remains constant regardless of the project size?

What are sunk costs?

Which of the following is an example of a direct cost?

Which estimating approach uses data from similar past projects to estimate current project costs?

Which estimating technique involves calculating cost by multiplying parameters like quantity by rate?

What is a primary disadvantage of analogous estimating?

In three-point estimating, what does 'cM' represent?

What is the formula for calculating the expected cost using the beta distribution in three-point estimating?

What type of estimate provides a cost range of -25% to +75% accuracy?

When is a definitive estimate typically prepared?

What is the purpose of a cost baseline in project management?

Which of the following is a time-phased budget used to monitor and control project costs?

What type of cost is associated with ongoing maintenance after the project's completion?

What does Earned Value Management (EVM) help project managers measure?

Which term refers to the amount of money added to a budget to cover known risks with active response strategies?

What is a characteristic of management reserves?

Which type of estimating involves breaking down the project into smaller components and estimating each one individually?

What is an advantage of using bottom-up estimating?

Which estimating technique is most suitable when project details are not yet finalized?

Which of the following describes opportunity cost?

What is Parkinson’s Law in the context of project management?

Which type of cost estimating is described as 'involving a mathematical model to estimate project costs'?

What is the primary purpose of the cost aggregation process?

Which of the following reserves is typically not part of the project cost baseline?

What does the S-curve represent in project cost management?

What is the definition of 'fixed cost'?

In the context of cost estimating, what does 'level of precision' refer to?

What is a primary benefit of using historical databases in cost estimating?

What is the function of a cost baseline in project management?

Which of the following tools helps manage cost performance throughout the project lifecycle?

In Agile, what is an item in the product backlog that estimates the effort required called?

What is the purpose of resource leveling?

Which estimating approach can be done at any point during the project?

What are indirect costs in project management?

Which type of costs are constant and do not change with the project’s size or scope?

What is the main risk of using top-down (analogous) estimating?

Which type of estimate is used to put dollars in the budget plan during early to mid-planning?

Which type of estimate is typically the most accurate?

What is 'cost aggregation' in project management?

What role do contingency reserves play in the project budget?

What type of estimating is 'bottom-up estimating'?

Which estimating technique uses parameters like size, weight, or complexity as inputs to determine cost estimates?

What does a cost baseline typically include?

In resource planning, what type of resources must be considered?

Which estimating method allows you to quickly compare items in a product backlog to each other to assign sizes?

What are 'control accounts' in project management?

What is the main purpose of the S-curve in project cost management?

Study Notes

Cost Management Plan

Units of Measure in Cost Management

Level of Accuracy in Cost Estimates

Types of Costs

Estimating Techniques

Cost Estimates and Accuracy

Cost Baseline and Performance Measurement

Reserves in Budgeting

Cost Aggregation

S-Curve in Project Cost Management

Opportunity Cost

Parkinson’s Law

Indirect Costs

Bottom-Up Estimating

Resource Planning

Control Accounts

Agile Estimation

Relative Estimating

Studying That Suits You

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