Cost Estimation and Budgeting Flashcards
6 cards from real Financial Management for Project Managers practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Cost Estimation and Budgeting flashcards as text
Management reserves in a project budget are intended for:
Answer: Unknown unknowns or unforeseen scope changes
Management reserves cover unknown unknowns — unanticipated events not identified during planning — and are controlled by senior management, not the project manager.
A project has a total budget of $500,000, a cost baseline of $450,000, and contingency reserves of $30,000. What is the management reserve?
Answer: $20,000
The management reserve equals total budget minus cost baseline minus contingency: $500,000 - $450,000 - $30,000 = $20,000.
Analogous cost estimating is most appropriate when:
Answer: Historical data from similar past projects is available and time is limited
Analogous estimating leverages historical data from similar projects and is fast, making it ideal early in the project when detailed information is not yet available.
Which document formally authorizes the project manager to apply organizational resources and establishes the cost budget?
Answer: Project charter
The project charter is the formal authorization document that gives the project manager authority to use resources, including budget allocations.
Life cycle costing in project financial management considers:
Answer: Total costs including acquisition, operation, maintenance, and disposal
Life cycle costing evaluates the total cost of ownership across all phases — acquisition, operation, maintenance, and decommissioning — to support complete financial decisions.
When should a project manager formally re-baseline the project cost baseline?
Answer: Only after an approved change request that significantly alters project scope
The cost baseline should only be re-baselined after an approved change request, as arbitrary changes undermine performance measurement integrity.