Project Cost Management Flashcards

What is the primary purpose of a cost baseline in project management?

Answer: To serve as the approved version of the time-phased project budget

The cost baseline is the approved, time-phased budget used as a basis for measuring and monitoring cost performance.

A project has EV of $50,000, PV of $60,000, and AC of $55,000. What is the Schedule Variance (SV)?

Answer: -$10,000

SV = EV - PV = $50,000 - $60,000 = -$10,000, indicating the project is behind schedule.

Which cost estimation method involves estimating individual work packages and rolling them up to a total project cost?

Answer: Bottom-up estimating

Bottom-up estimating disaggregates work into smaller components, estimates each, then aggregates for the total cost.

During project execution, the project manager notices CPI = 0.85 and SPI = 0.90. What is the most appropriate response?

Answer: Analyze root causes and implement corrective actions

Both indices below 1.0 indicate cost and schedule problems; the project manager should analyze root causes before taking corrective action.

The To-Complete Performance Index (TCPI) based on BAC is calculated as:

Answer: (BAC - EV) / (BAC - AC)

TCPI (BAC) = (BAC - EV) / (BAC - AC), representing the required cost efficiency to complete the project within the original budget.

Which of the following best describes 'sunk costs' in project cost management?

Answer: Costs already incurred that should not influence future decisions

Sunk costs are past expenditures that are irrelevant to future decision-making because they cannot be recovered.

A project manager is using three-point estimating. The optimistic estimate is $40K, the pessimistic estimate is $100K, and the most likely estimate is $60K. What is the PERT estimate?

Answer: $63,333

PERT estimate = (O + 4M + P) / 6 = ($40K + 4×$60K + $100K) / 6 = $380K / 6 = $63,333.