Capm All In One - Chapter 7 Key Terms

Front 1

ctual Cost (AC)

Back 1

The actual amount of monies the project has spent to date.

Front 2

Analogous Estimating

Back 2

An approach that telies on historical information to predict the cost of the current project. It is also known as top-down estimating and is the least reliable of all the cost-estimating approaches.

Front 3

Botton-Up Estimating

Back 3

An estimating approach that starts from zero, accounts for each component of the WBS, and arrives at a sum for the project. It is completed with the project team and can be one of the ost tiem-consuming and most reliable methods to predict project costs.

Front 4

Budget Estimate

Back 4

This estimate is also somewhat broad and is used early in the planning processes and also is top-down estimates. The range of variance for the estimate can be from - 10 percent to +25 percent.

Front 5

Commercial Database

Back 5

A cost-estimating approach that uses a database, typically software driven, to create the cost estimate for a project.

Front 6

Contingency Reserve

Back 6

A contingency allowance to account for overruns in costs. Contingency allowances are used at the project manager's discretion and with management's approval to counteract cost overruns for scheduled activities.

Front 7

Cost Aggregation

Back 7

Costs are parallel to each WBS work package. The costs of each work package are aggregated to their corresponding control accounts. Each control account then is aggregated to the sum of the project costs.

Front 8

Cost Baseline

Back 8

A time-lapse exposure of when the project mon ies are to be spent in relation to comulative values of the work completed in the project.

Front 9

Cost Budgeting

Back 9

The cost aggregation achieved by assigning specific dollar amounts for each of the scheduled activities or, more likely, for each of the work packages in the WBS. Cost budgeting applies the cost estimates over time.

Front 10

Cost Change Control System

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A system that examines any changes associated with scope changes, the cost of materials, and the cost of any other resources, and the associated impact on the overall project cost.

Front 11

Cost Managment Plan

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The cost managment plan dictates how cost variances will be managed.

Front 12

Cost of Poor Quality

Back 12

The monies spent to recover from not adhering to the expected level of quality. Examples may include rework, defect repair, loss of life or limb because safety precautions were not taken, loss of sales, and loss of customers. This is also known as the cost of nonconformance to quality.

Front 13

Cost of Quality

Back 13

The monies spent to attain the expected level of quality within a project. Examples include training, testing, and safety precautions.

Front 14

Cost Performance Indes (CPI)

Back 14

Measures the project bases on its financial performance. The formula is CPI = EV/AC.

Front 15

Cost Variance (CV)

Back 15

The difference of the earned value amount and the cumulative actual costs of the project. The formula is CV = EV - AC.

Front 16

Definitive estimate

Back 16

This estimate type is one of the most accurate. It's used late in the planning processes and is associated with bottom-up estimating. You need the WBS in order to create the definitive estimate. The range of variance for the estimate can be from -5 percent to +10 percent.

Front 17

Direct Costs

Back 17

Costs are attributed directly to the project work and cannot be shared among projects. (for example, airfare, hotels, long-distance phone charges, and so on).

Front 18

Earned Value (EV)

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Earned value is the physical work completed to date and the authorized budget for that work. It is the percentage of the BAC that represents the actual work completed in the project.

Front 19

Estimate At Completion (EAC)

Back 19

These forcasting formulas predict the likely completed costs of the project based on current scenarios within the project.

Front 20

Estimate To C omplete (ETC)

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An earned value managment formula that predicts how much funding the project will require to be completed. Three variations of this formula are based on conditions the project may be experiencing.

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Fixed Costs

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Costs that remain constant throughout the life of the project (the cost of a piece of rented equipment for the project, the cost of a consultant brought on tot he project, and so on).

Front 22

Funding Limit Reconciliation

Back 22

An organization's approach to managing cash flow against the project deliverables based on a schedule, milestone accomplishment, or data constraints.

Front 23

Indirect Costs

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Costs that are representative of more than one project (for example, utilities for the performing organization, access to a training room, project managment software license, and so on).

Front 24

Known Unknown

Back 24

An event that will likely happen within the project, but when it will happen and to what degree is unknown. These events, such as delays, are usually risk related.

Front 25

Learning Curve

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An approach that assumens the cost per unit decreases the more units workers complete, because workers learn as they complete the required work.

Front 26

Oligoploly

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A market conditionwhere the market is so tight that the actions of one vendor affect the actions of all the other.

Front 27

Opportunity Cost

Back 27

The total cost of the opportunity that is refused to realize an opposing opportunity.

Front 28

Parametic Estimating

Back 28

An approach using a parametric model to extrapolate what costs will be for a project (for example, cost per hour and cost per unit). It can include variables and points based on conditions.

Front 29

Planned Value (PV)

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Planned value is the work sceduled and the budge authorized to accomplish the work. It is the percentage of the BAC that reflects where the project whould be at this point in time.

Front 30

Project Variance

Back 30

The final variance, which is discovered only at the project's completion. The formula is VAR = BAC - AC.

Front 31

Regression Analysis

Back 31

This is a statistical approach to predicting what future values may be, based on historical values. Regression analysis creates quantitiative predictions based on variables wthin one value to predict variables in another. This form of estimating relies solely on pure statistical math to reveal relationships between variables and to predict future values.

Front 32

Reserve Analysis

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Cost reserves are for unknown unknowns withinin a project. The contingency reserve is not part of the project cost baseline, but is included as part of the project budget.

Front 33

Rough Order of Magnitude

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This rough estimate is used during the initiating processes and in top-down estimates. The reange of variance for the estimate can be from -25 percent to +75 percent.

Front 34

Schedule Performance Index (SPI)

Back 34

Measures the project based on its schedule performance. The formula is SPI = EV/PV.

Front 35

Schedule Variance (SV)

Back 35

The differnece between the earned value and the planned value. The formula is SV = EV - PV.

Front 36

Single Source

Back 36

Many vendors can provide what your project needs to purchase, but you prefer to work with a specific vendor.

Front 37

Sole Source

Back 37

Only one vendor can proveide what your project needs to purchase. Examples include a specific consultant, specialized service, or unique type of material.

Front 38

Sunk Costs

Back 38

Monies that have already been invested in a project.

Front 39

To-Complete Performance Index

Back 39

A formula to forecast the likelihood of a project ot achieve its goals based on what's happening in the project right now. There are two differenct flavors for the TCPI, depending on what you want to accomplish. If you want to see if your project can meet the budget at completion, you'll use this formula: TCPI = (BAC - EV)/(BAC - AC). If you want to see if your project can meet the newly created estimate at completion, you'll use this version of the formula: TCPI = (BAC - EV)/(EAC - AC).

Front 40

Variable Costs

Back 40

Costs that change based on the conditions applied in the project (the number of meeting participants, the supply of and demand for materials, and so on).

Front 41

Variance

Back 41

The difference between what was expected and what was experienced.

Front 42

Variance At Completion (VAC)

Back 42

A forecasting formula that predicts how much of a variance the project will likely have based on current conditions within the project. The formula is VAC = BAC - EAC.