Project Cost Management Part 2 by Whizlabs Software

About the Lecture

The lecture Project Cost Management Part 2 by Whizlabs Software is from the course Project Management Professional - Training. It contains the following chapters:

Earned value management technique
Performance Indexes
Example - EVM technique
Sample exercise
Other concepts

Included Quiz Questions

A task was scheduled to use two persons, full time, and take two weeks to complete. Instead, the project manager was only able to assign one person to this task. At the end of two weeks, the person assigned to the task completed 75% of the work. What is the cost performance index?

1.5
0.75
1.33
0.5

A Project was scheduled to be performed by 3 resources for four weeks, working throughout the Project duration. During first week, only 2 resources were assigned, whereas during second week, 2 more resources joined in. At the end of second week, 60% of the value of the work had been completed. What is the CPI for this Project at the end of second week?

1.2
0.83
0.80
1.66

You have been working on a project as a Project Manager. The original budget for the project was $50,000 and the project was planned to be completed in 10 months. However, the total cost incurred at the end of the project is $65,000 & it has taken 12 months to complete the project. Upon completion, what’s the Schedule Performance Index (SPI) for the project?

1.0
0.79
0.83
Can’t be determined

You are working on a construction Project. To estimate cost, you have considered the cost estimation of similar projects undertaken in past and have also considered the current inflation rate while estimating cost of raw material & resource cost. The technique used herein is:

Parametric Estimating
Expert judgment
Analogous Estimating
Monte-carlo Analysis

After 25% of the scope is complete, you have found that 50,000$ have already been spent from the total budget. If BAC is 200,000$, then what’s the CPI at this stage?

1.0
0.5
0,25
1.25

Considering the data given in previous question, what can be said about the project?

The project cost expenditures are as per the budget.
The project is on schedule
The project is behind schedule
The project is over budget (cost overrun)

You are a project manager of a project to automate the physical security system of a building. Though you had planned to complete the project with 30 days, the project has eventually been completed in 45 days. What’s the SPI at the end of the project?

1.0
0.67
1.5
-15 days

Which of the following is not true about management reserve?

The project manager can use the management reserve as and when applicable.
The management reserve accounts for unidentified risk factors.
The management reserve is added on top of the cost baseline.
The management reserve can be a percentage of estimated cost or a fixed amount depending on the nature of the project.

You have just completed the cost estimation & the final budget has been determined and has been approved by the sponsor. Which of the following is unknown at this time?

BAC
Cost baseline
Planned time for Completion
AC

The BAC of a project was estimated at 10,000$. After 50% work has been completed, it has been found that 6,000$ has been spend to complete the work till date. What is ETC?

6,000$
12,000$
10,000$
4,000$

The BAC of a project was estimated at 10,000$. After 50% work has been completed, it has been found that 6,000$ has been spend to complete the work till date. Considering that the project continues to perform at the same CPI, What will be VAC?

-2000$
2000$
-1000$
1000$

What is the present value of $100,000 to be received two years from now with an interest rate of 8%?

85734$
10000$
60096$
30864$

Cost baseline is the primary output of which of the following process?

Determine Budgets
Control costs
Estimate Costs
Plan Cost Management

You need to take an office on lease at a commercial complex in order to establish a sales office that will be used for marketing the product of your project. The lease cost is an example of:

Both a & c
Fixed cost
Indirect cost
Direct cost

Which of the following is not a part of the cost management plan?

Cost estimates of WBS components
Frequency of performing variance analysis
Limit of accuracy for the estimations
Estimating techniques to be used for the project

Risk Register is an appropriate input in which of the following process?

Determine Budget
Reserve analysis
Estimate Costs
Control Costs

You are working as a project manager for a domain migration project. It’s been 3 weeks since you are working on the project and the project is 2 weeks into the execution phase. Performance measurement data shows: BAC=$60,000, PV=$50,000, AC=$40,000, EV=$20,000. What’s the CPI at this stage?

0.5
2.0
0.4
1.33

Considering the previous question, calculate the CPI at which you need to perform in the reminder of the project to be able to complete the project within budget.

2.0
0.5
0.4
1.33

The sponsor agrees to allocate $10,000 more to the project. Based on this what is the required TCPI?

1.33
0.4
0.5
2.0

Which of the following estimate types is appropriate to draw a rough estimate of cost at a very early stage of the project?

Ball park estimates
Budget estimates
Definitive estimates
Bottom-up estimate

Author of lecture Project Cost Management Part 2

Whizlabs Software

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Excerpts from the accompanying material

... 7.1 Plan Cost Management: The objective of this process is to create a Cost Management Plan. Cost Management Plan Just like the Scope & Schedule Management Plan, this is also a subset of the Project Management Plan & can be defined as a ...

...with more available information. The primary output of this process is activity cost estimates, which provides the basis of cost estimate. Please note that padding is not an acceptable practice as per PMI. Hence, the cost estimates are kept realistic and as per the calculation. No buffer/tolerance is added to allocate extra cost for the activities being estimated at this point of time. Analogous Estimating: Analogous estimations are done based on historical records. It uses parameters (e.g . scope, cost, ..

...are rolled up to arrive at the project level estimate. More accurate? Gains buy-in from team? Provides a basis for monitoring and control? Takes more time and cost to come up with? Requires the project to be well defined and understood? Three-Point Estimation (PERT): The accuracy of single-point activity estimates can be improved by considering estimation uncertainty and risk. Most likely (M): The estimate of the activity, based on realistic effort assessment for the required work and any predicted expenses Optimistic (O): The activity ...

...packages to establish an authorized cost baseline. The cost baseline includes all authorized budg etc, but excludes management reserves. Reserve Analysis we consider the project buffer with the help of reserve analysis. Budget reserve an analysis can establish both the contingency reserves and the management reserves of the project. Contingency reserve is a separately planned amount used to allow for future situations which may be planned, but only partially. Contingency Reserve Contingency reserves are kept aside, mainly for ...

...for unplanned changes to project scope and cost; say for natural calamity, like: earthquake, flood etc. Project manager does not have access to the management reserve funds without senior management approval; however, contingency reserve is within the reach of the project manager and can be used by the project manager whenever a known risk occur. Bottom- up technique In this example the estimation is being done. Costs of individual activities associated with a work project ...

...the relationship between the consumption of project funds to the physical work being accomplished for such expenditures. Cost control includes: Influencing the factors that create changes to the authorized cost baseline, ...

...used method of performance measurement which integrates project scope, cost, and schedule measures to help the project management team assess and measure project performance and progress. The principles of EVM can be applied to all projects, in any industry. EVM develops and monitors three key dimensions for each work package and control account: Planned Value (PV): It is the authorized budget assigned to the work to be accomplished for an activity or work breakdown structure component.The total of the PV is sometimes referred to as the performance measurement baseline (PMB). The total planned value for the project is ...

...total budget? Estimate at completion (EAC): What you expect the job to cost after some portion of the work has been completed.EAC = BAC / CPI {OR} [ AC / EV ] * BAC? Estimate to Complete (ETC= EAC-AC): How much more do you expect the job to cost after some portion of the work has been completed? Variance at completion (VAC): VAC = BAC-EAC? Percent Completion: EV / BAC Sample exercise? Given the following problem: EV = $55, AC = $67, PV = $56 , BAC = $137? Cost Variance = EV-AC = $55-$67 = -$12, Schedule Variance = EV-PC = $55-$56 = -$1, CPI = EV/AC = 55/67 = .82, SPI = EV/PC = 55/56 = .98, EAC = BAC/CPI = 137/.82 = ...

...of Return: Simple calculation of annual financial return for a given outlay without consideration of any external or related factors. PBP (Payback Period): The number of time periods up to the point at which cumulative revenues exceed cumulative costs and, therefore, the project has turned a profit. BCR (Benefit cost ratio): Benefit-cost ratio (BCR) = PV of revenue/PV of costs. Target Revenue should be at least 1.3 times the cost. Life cycle costing: Evaluatingcost based on the cost of the whole life of the product and not only on ...