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
Fixed costs in project management are best described as costs that:
Answer: Remain constant regardless of changes in project activity level
Fixed costs do not change with the level of project output or activity, such as equipment lease payments or facility rental fees.
Variable costs in a project are those that:
Answer: Change in direct proportion to the level of project activity or output
Variable costs increase or decrease proportionally with project activity, such as raw materials consumed or hourly labor costs based on hours worked.
A project budget at completion (BAC) is $200,000. The project is 40% complete. What is the Planned Value (PV) if the project is on schedule?
Answer: $80,000
If the project is on schedule and 40% complete, the Planned Value equals 40% of the BAC: 0.40 × $200,000 = $80,000.
The three-point estimating technique uses optimistic, pessimistic, and most likely estimates. The PERT formula is:
Answer: (O + 4M + P) / 6
The PERT (Program Evaluation and Review Technique) formula weights the most likely estimate four times: (Optimistic + 4 × Most Likely + Pessimistic) / 6.
Which cost estimating technique is most accurate but also the most time-consuming?
Answer: Bottom-up estimating
Bottom-up estimating is the most accurate technique because it estimates every individual work package, but it requires the most time and detailed WBS information.
Cost aggregation in project budgeting involves:
Answer: Rolling up work package cost estimates to control accounts and then to the project total
Cost aggregation sums work package estimates upward through the WBS hierarchy to control accounts and ultimately to the total project budget.