Podcast
Questions and Answers
What is the main difference between the cost baseline and the cost budget in project management?
What is the main difference between the cost baseline and the cost budget in project management?
- The cost baseline represents the original project cost estimate, while the cost budget includes earned value calculations.
- The cost baseline contains actual project costs, while the cost budget includes EAC calculations.
- The cost baseline is a snapshot of project costs at a specific point, while the cost budget is an estimate of total project costs.
- The cost baseline includes management reserves, while the cost budget includes contingency reserves. (correct)
Which tool or technique is used to come up with the project cost estimate in project management?
Which tool or technique is used to come up with the project cost estimate in project management?
- Contingency reserves
- Reserve analysis (correct)
- Estimate at Completion (EAC)
- Earned Value Management
What is the primary purpose of Earned Value Management methodology in project management?
What is the primary purpose of Earned Value Management methodology in project management?
- Calculate the value provided to the customer
- Forecast future performance based on current performance (correct)
- Calculate the number of days left in the project
- Determine the profitability of the project
In project management, what does Estimate at Completion (EAC) refer to?
In project management, what does Estimate at Completion (EAC) refer to?
When calculating the cost baseline in project management, what are contingency reserves used for?
When calculating the cost baseline in project management, what are contingency reserves used for?
Why is it cautioned that understanding terms like EAC and other similar definitions in Earned Value Management is important?
Why is it cautioned that understanding terms like EAC and other similar definitions in Earned Value Management is important?
What does a Cost Performance Index (CPI) value of 0.84 indicate?
What does a Cost Performance Index (CPI) value of 0.84 indicate?
If Estimate at Completion (EAC) = AC + (BAC – EV), what does BAC represent?
If Estimate at Completion (EAC) = AC + (BAC – EV), what does BAC represent?
What does Schedule Performance Index (SPI) value of 0.84 indicate?
What does Schedule Performance Index (SPI) value of 0.84 indicate?
What does Estimate To Complete (ETC) = EAC – AC formula calculate?
What does Estimate To Complete (ETC) = EAC – AC formula calculate?
When using bottom-up forecasting for Estimate at Completion (EAC), what does EAC = AC + bottom-up ETC represent?
When using bottom-up forecasting for Estimate at Completion (EAC), what does EAC = AC + bottom-up ETC represent?
What does a Cost Performance Index (CPI) value greater than 1 indicate?
What does a Cost Performance Index (CPI) value greater than 1 indicate?
What term is used to describe the budgeted cost for the work planned to be completed by a specific point in time?
What term is used to describe the budgeted cost for the work planned to be completed by a specific point in time?
Which formula is used to calculate Estimate at Completion (EAC)?
Which formula is used to calculate Estimate at Completion (EAC)?
What does Schedule Variance (SV) represent?
What does Schedule Variance (SV) represent?
In project management, what does Cost Variance (CV) indicate?
In project management, what does Cost Variance (CV) indicate?
Which term describes the anticipated total cost of the project at completion?
Which term describes the anticipated total cost of the project at completion?
What does ETC (Estimate to Complete) represent in project management?
What does ETC (Estimate to Complete) represent in project management?
Study Notes
Earned Value Management
- EAC (Estimate At Completion) is the anticipated total cost of the project at completion.
- ETC (Estimate To Complete) is the amount of money needed to complete the remaining work on the project.
Cost Baseline and Cost Budget
- The cost baseline includes contingency reserves.
- The cost budget includes management reserves in addition to the cost baseline.
- The difference between the cost baseline and the cost budget is the management reserves.
Earned Value Formulas
- CV (Cost Variance) = EV - AC, where negative values indicate over budget and positive values indicate under budget.
- SV (Schedule Variance) = EV - PV, where negative values indicate behind schedule and positive values indicate ahead of schedule.
- CPI (Cost Performance Index) = EV / AC, where values greater than 1 are good (under budget) and values less than 1 are bad (over budget).
- SPI (Schedule Performance Index) = EV / PV, where values greater than 1 are good (ahead of schedule) and values less than 1 are bad (behind schedule).
Estimate At Completion (EAC)
- EAC = AC + (BAC - EV), where BAC is the total project budget.
- EAC is a forecasted value of the project when completed.
- EAC can be calculated using bottom-up manual forecasting for the ETC.
Estimate To Complete (ETC)
- ETC = EAC - AC, where EAC is the estimated cost at completion and AC is the actual cost incurred so far.
- ETC is the remaining amount of money needed to complete the project.
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Description
Test your knowledge on project cost estimation concepts like anticipated total cost at project completion (EAC), estimate at completion (EAC) and earned value. Practice questions to understand the difference between cost baseline, cost budget, management reserves, and contingency reserves.
