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
Which type of cost estimate is typically prepared during the project initiation phase using analogous techniques and carries an accuracy range of -25% to +75%?
Answer: Rough Order of Magnitude (ROM) estimate
A ROM estimate is a high-level approximation made early in a project with limited information, typically ranging from -25% to +75% accuracy.
Bottom-up cost estimating involves:
Answer: Estimating costs at the work package level and summing them up
Bottom-up estimating breaks work into the smallest components, estimates each individually, and aggregates them to arrive at the total project cost.
Parametric cost estimating uses:
Answer: Statistical relationships between historical data and project variables
Parametric estimating applies a statistical model or cost driver (e.g., cost per square foot) derived from historical data to estimate project costs.
The project cost baseline is best described as:
Answer: The time-phased budget used to measure and monitor project cost performance
The cost baseline is the approved, time-phased budget against which actual project costs are tracked and measured throughout execution.
Which cost is directly traceable to a specific project deliverable or work package?
Answer: Direct cost
Direct costs can be specifically attributed to a project activity or deliverable, such as labor hours worked on a task or materials purchased for it.
Contingency reserves in project budgeting are set aside to address:
Answer: Known unknowns — identified risks with uncertain impact
Contingency reserves cover known risks that have been identified in the risk register but whose exact impact is uncertain.