What is the primary purpose of cost estimation in project management?
Cost estimation helps predict the financial resources required for a project, ensuring adequate budgeting and financial planning.
Which cost estimation method relies on past project data to estimate costs?
The analogous estimation method uses historical data from similar projects to estimate costs, making it useful for early-stage budgeting.
What is a key characteristic of a bottom-up cost estimation approach?
Bottom-up estimation involves calculating individual cost components at a detailed level and summing them to determine the total project cost.
Which budgeting technique assigns costs based on project deliverables?
Activity-based budgeting assigns costs based on project deliverables and tasks, ensuring accurate financial allocation.
Which factor can lead to cost overruns in a project budget?
Scope creep, or uncontrolled changes in project scope, often leads to increased costs and budget overruns due to additional work requirements.
What is the purpose of contingency reserves in budgeting?
Contingency reserves account for unexpected costs and uncertainties in a project, ensuring financial preparedness for unforeseen events.