Cost Management Tools and Techniques
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Questions and Answers

What is the most widely used performance measurement method?

Earned value

What is a sunk cost?

An expense that cannot be recovered.

What are the two types of costs?

Fixed and variable costs

What is the purpose of resource leveling?

<p>To create a smoother distribution of resource usage.</p> Signup and view all the answers

What is the purpose of quality control?

<p>To verify whether project outcomes meet acceptable quality, reflect the project scope, and satisfy stakeholders.</p> Signup and view all the answers

What are the 8 distinct steps of Quality Assurance & Control (QPA)?

<p>Establish a mission statement, describe and prioritize accountabilities, describe and analyze processes, determine customer requirements, build in customer requirements, document processes, establish performance monitoring, and improve.</p> Signup and view all the answers

What is the goal of quality management?

<p>To meet or exceed customer expectations.</p> Signup and view all the answers

What is the purpose of ISO (International Organization for Standardization)?

<p>To develop and publish international standards.</p> Signup and view all the answers

What is the primary purpose of statistical sampling?

<p>To gain knowledge about the whole population and to predict quality outcomes of the population using statistics. (A)</p> Signup and view all the answers

Which of the following is an example of a fixed cost in organizing an event?

<p>Room rental (B)</p> Signup and view all the answers

A project that stays within budget is usually an exception, not the rule.

<p>True (A)</p> Signup and view all the answers

What are the three indicators used to manage a project in the earned value method?

<p>Planned Value (PV), Earned Value (EV), and Actual Cost (AC)</p> Signup and view all the answers

What does 'PV' stand for in the earned value method?

<p>Planned Value (B)</p> Signup and view all the answers

Flashcards

Cost Management Plan

A document that defines how project costs will be managed, including unit of measure, precision level, control thresholds, and reporting.

Precision Level

Degree of rounding for cost estimates.

Margin of Error

Acceptable level of error in cost estimates.

Control Threshold

Level of variation triggering corrective action in cost.

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Report Types (Cost Management)

Predefined templates and frequencies for cost reporting.

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Process Description (Cost Management)

Detailed description of cost management processes.

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Cost Estimate Inputs

Project documents and factors used to estimate costs.

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Scoping Letter

Document outlining project scope and expectations.

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Work Breakdown Structure (WBS)

Hierarchical decomposition of project work into smaller tasks.

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Risk Management Plan

Document outlining project risks and mitigation strategies.

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Project Environmental Factors

External factors influencing project cost estimates (market, competition).

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HR Management Plan

Document outlining project staffing requirements and costs.

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Expert Judgement

Estimating costs based on expert opinions and experience.

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Estimation by Analogy

Estimating costs based on similar previous projects.

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Parametric Estimation

Estimating costs using statistical relationships and historical data.

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Bottom-up Estimation

Estimating costs by aggregating estimates for individual tasks.

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Three-point Estimating

Estimating using optimistic, pessimistic, and most likely cost estimates

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Reserves Analysis

Allocating budget for unforeseen costs or risks.

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Cost of Quality

Costs associated with achieving and maintaining quality in a project.

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Estimated Activity Costs

Quantitative estimate of costs for each project activity or task.

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Basis for Estimates

Records justifying the methods and data used in cost estimations.

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Updating Project Documents

Regularly reviewing and updating project documents to reflect current estimates

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Final Budget

Aggregated cost estimates and reserves for the entire project.

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Fixed Costs

Costs that remain constant regardless of project output.

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Variable Costs

Costs that change proportionally to project output.

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Study Notes

Cost Management: Tools and Techniques

  • Cost management plans involve precision levels and acceptable error degrees (e.g., ±10%).
  • Control thresholds define variation levels requiring corrective actions.
  • Predefined cost management templates and frequencies are used.
  • Cost management process descriptions detail the associated costs.

Cost Management: Global Approach

  • Input elements include scoping letters, work breakdown structures, risk management plans, project environmental factors, and human resource management.
  • Cost estimates are based on the work breakdown structure and project schedule.
  • Tools and techniques include expert judgment, estimation by analogy, parametric estimation, bottom-up estimation, three-point estimating, reserves analysis, and cost of quality.

Cost Estimates (Outputs)

  • Estimated activity costs quantify costs to complete project tasks.
  • Cost estimations employ various bases, which should be documented to understand potential inaccuracies.
  • Project documents should be regularly updated.

Determining the Final Budget

  • Cost aggregation follows the work breakdown structure.
  • Reserves analysis considers estimation, management, and risk-related factors.
  • Employee expertise is essential.
  • Budget components include total management reserves, base costs, controls, and contingent reserves.

Definitions and Concepts

  • Fixed costs: Independent of production quantities, like event room rentals.
  • Variable costs: Vary proportionally with production level—e.g., performance bonuses.
  • Direct costs: Clearly attributable to a specific project—e.g., employee salary.
  • Indirect costs: Resources allocated to multiple projects.

Sunk Costs

  • Sunk costs are unrecoverable expenses—renting an unusable machine is a sunk cost.

Cost Control

  • Earned value is the widely used performance measurement method.

Sources of Financing

  • Internal financing sources include cash flow operations and voluntary contributions.
  • External financing sources include state funding, grants, donations, sponsorships, and crowd funding.

Quality and Performance

  • Quality can be categorized by performance, specific features, reliability, conformance, durability, serviceability, and aesthetics.

Quality Management

  • Quality management encompasses quality planning, quality assurance, and quality control.
  • Quality entails meeting or exceeding customer expectations.
  • Key components consist of customer satisfaction.

Standard and Quality ISO

  • ISO (International Organization for Standardization) is a non-governmental organization coordinating international standards.
  • Different ISO versions define quality management systems' fundamental principles, requirements, and models.

Developing a Project Quality Plan

  • The plan comprises eight stages: establish mission statement, prioritize accountabilities, analyze processes, identify customer requirements, develop in-built customer requirements, and document processes.

Quality Control (QC)

  • Quality control verifies if project outcomes meet quality standards and stakeholder requirements.
  • Tools include cause-and-effect diagrams, run charts, scatter diagrams, and histograms.

Process Maps and Flowcharts

  • Process maps/flowcharts visually represent project processes.

Control Charts (X-bar Charts)

  • X-bar charts track process variation.
  • Crucial for determining a process' reliability and predictability within acceptable parameters.

Statistical Sampling

  • Statistical sampling involves selecting a subset of a population for quality assessment and prediction.
  • A "population" represents the total quantity and a "sample" represents a subset extracted for analysis.

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Related Documents

Project Management: Managing Costs and Budgets PDF

Description

Explore the essential tools and techniques used in cost management. This quiz covers cost management plans, control thresholds, and various estimation methods employed during project management. Test your understanding of how these elements contribute to effective project cost control.

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