FPM Week 7 - Project Cost and Resources
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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?

    <p>Fixed cost</p> Signup and view all the answers

    What are sunk costs?

    <p>Costs already spent that cannot be recovered</p> Signup and view all the answers

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

    <p>Salaries of team members working exclusively on the project</p> Signup and view all the answers

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

    <p>Analogous estimating</p> Signup and view all the answers

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

    <p>Parametric estimating</p> Signup and view all the answers

    What is a primary disadvantage of analogous estimating?

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

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

    <p>Most likely cost</p> Signup and view all the answers

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

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

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

    <p>Rough Order of Magnitude (ROM) estimate</p> Signup and view all the answers

    When is a definitive estimate typically prepared?

    <p>Just before execution, after planning is complete</p> Signup and view all the answers

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

    <p>To serve as the budget for measuring and controlling cost performance</p> Signup and view all the answers

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

    <p>Cost baseline</p> Signup and view all the answers

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

    <p>Operational cost</p> Signup and view all the answers

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

    <p>Project performance and progress against the budget</p> 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?

    <p>Contingency reserves</p> Signup and view all the answers

    What is a characteristic of management reserves?

    <p>Allocated for unforeseen work within the scope of the project</p> Signup and view all the answers

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

    <p>Bottom-up estimating</p> Signup and view all the answers

    What is an advantage of using bottom-up estimating?

    <p>It provides a very accurate cost estimate</p> Signup and view all the answers

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

    <p>Rough Order of Magnitude (ROM) estimating</p> Signup and view all the answers

    Which of the following describes opportunity cost?

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

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

    <p>Work expands to fill the time available for its completion</p> Signup and view all the answers

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

    <p>Parametric estimating</p> Signup and view all the answers

    What is the primary purpose of the cost aggregation process?

    <p>To compile individual cost estimates into a total project cost</p> Signup and view all the answers

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

    <p>Management reserves</p> Signup and view all the answers

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

    <p>Cumulative cost, labor hours, or quantities over time</p> Signup and view all the answers

    What is the definition of 'fixed cost'?

    <p>Costs that remain constant regardless of the size of the project</p> Signup and view all the answers

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

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

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

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

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

    <p>To measure, monitor, and control overall project cost performance</p> Signup and view all the answers

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

    <p>Cost baseline</p> Signup and view all the answers

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

    <p>User story</p> Signup and view all the answers

    What is the purpose of resource leveling?

    <p>To ensure resource demand does not exceed availability</p> Signup and view all the answers

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

    <p>Parametric estimating</p> Signup and view all the answers

    What are indirect costs in project management?

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

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

    <p>Fixed costs</p> Signup and view all the answers

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

    <p>Inaccuracy if there is no historical data for comparison</p> Signup and view all the answers

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

    <p>Budgetary estimate</p> Signup and view all the answers

    Which type of estimate is typically the most accurate?

    <p>Bottom-up estimate</p> Signup and view all the answers

    What is 'cost aggregation' in project management?

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

    What role do contingency reserves play in the project budget?

    <p>Provide funding for unknown risks within the scope of the project</p> Signup and view all the answers

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

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

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

    <p>Parametric estimating</p> Signup and view all the answers

    What does a cost baseline typically include?

    <p>Contingency reserves and work package estimates</p> Signup and view all the answers

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

    <p>People, equipment, facilities, and materials</p> 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?

    <p>Relative estimating</p> Signup and view all the answers

    What are 'control accounts' in project management?

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

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

    <p>To measure cumulative cost performance over time</p> 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.

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