Project Cost Management Chapter 5
14 Questions
2 Views

Project Cost Management Chapter 5

Created by
@WorldFamousAtlanta987

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is cost?

  • Something given up in exchange. (correct)
  • A resource sacrificed or foregone to achieve a specific objective. (correct)
  • Measured in monetary amounts, such as RM, that must be paid to acquire goods and services. (correct)
  • Direct costs can be indirectly related to creating the products and services of the project.

    False

    Management reserves allow for future situations that are ______________.

    unpredictable

    What is the purpose of contingency reserves in cost estimation?

    <p>Allowing for future situations that may be partially planned for.</p> Signup and view all the answers

    What is the labor rate suggested for the project manager?

    <p>$100/hour</p> Signup and view all the answers

    What is the labor rate suggested for each team member?

    <p>$75/hour</p> Signup and view all the answers

    How many handheld devices are estimated by the contractor?

    <p>100 devices</p> Signup and view all the answers

    How many servers are estimated at $4,000 each?

    <p>Four servers</p> Signup and view all the answers

    How will software license costs be negotiated?

    <p>License costs will be negotiated with each supplier</p> Signup and view all the answers

    What cost per handheld device will be used for licensed software?

    <p>$200</p> Signup and view all the answers

    How is testing estimated based on the project costs?

    <p>10% of the total hardware and software cost</p> Signup and view all the answers

    What is the estimated cost per trainee for training?

    <p>$500</p> Signup and view all the answers

    Match the following inputs for determining the budget with their respective sources:

    <p>Scope baseline = Activities in the work breakdown structure Activity cost estimates = Determining the budget Risk register = Inputs for determining the budget Cost management plan = Produce a cost baseline</p> Signup and view all the answers

    A cost baseline is used by project managers to measure and monitor cost performance.

    <p>True</p> Signup and view all the answers

    Study Notes

    Cost Management Planning

    • Cost: a resource sacrificed or foregone to achieve a specific objective, measured in monetary amounts.
    • Basic Principles of Cost Management:
      • Profits = revenues - expenditures
      • Profit margin = ratio of profits to revenues
      • Cash flow analysis: method for determining estimated annual costs and benefits for a project
      • Tangible costs/benefits: easy to measure in dollars
      • Intangible costs/benefits: difficult to measure in dollars
      • Direct costs: directly related to project products/services
      • Indirect costs: not directly related to project products/services
      • Sunk cost: money spent in the past, should not be considered in project selection decisions
      • Learning curve theory: unit cost decreases as more units are produced repetitively
      • Reserves: contingency funds to mitigate cost risk

    Planning Cost Management

    • Cost management plan includes:
      • Level of accuracy
      • Units of measure
      • Organizational procedures links
      • Control thresholds
      • Rules of performance measurement
      • Reporting formats
      • Process descriptions
    • Purpose of cost management plan: to establish guidelines for managing and controlling project costs

    Estimating Costs

    • Types of cost estimates:
      • Rough Order of Magnitude (ROM) estimate: early estimate for project selection decisions
      • Budgetary estimate: used for budget allocation
      • Definitive estimate: accurate estimate for project costs
    • Cost estimation tools and techniques:
      • Analogous estimation
      • Bottom-up estimation
      • Parametric estimation
    • Problems with cost estimation:
      • Estimates done too quickly
      • Lack of experience
      • Human bias towards underestimation
      • Management desires accuracy

    Developing Cost Estimation

    • Ground rules and assumptions for cost estimation:
      • Clarify project scope and objectives
      • Identify resources and labor costs
      • Establish labor rates and hours
      • Estimate hardware and software costs
      • Consider risks and reserves
    • Case study: The Surveyor Pro project
      • Developed cost estimation based on WBS categories
      • Estimated costs by month and labor hours
      • Included reserves for risks and uncertainties

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    This quiz covers the basics of project cost management, including understanding cost, profits, and profit margins. Learn how to increase profits by managing revenues and expenses.

    More Like This

    Project Cost Management Overview
    10 questions
    Project Cost Management
    5 questions

    Project Cost Management

    FortunateHarmonica avatar
    FortunateHarmonica
    Project Cost Management
    24 questions

    Project Cost Management

    EnergySavingChrysocolla avatar
    EnergySavingChrysocolla
    Project Cost Management Overview
    40 questions
    Use Quizgecko on...
    Browser
    Browser