4 Cost Planning and Control Free Online FlashCards

What does a cost estimate forecast?

A cost estimate forecasts the resources needed to complete specified work.

How does analogous estimating work?

Use actual costs from a similar project and adjust them for differences. This approach is useful early, when project detail is limited.

What is parametric cost estimating?

Apply a cost rate to a measurable quantity, such as a cost per unit. The rate and quantity must fit the work being estimated.

How does bottom-up estimating build a project estimate?

Estimate detailed activities or work packages, then aggregate their costs. It can be detailed but requires a sufficiently defined scope.

What weighted formula is commonly used for three-point estimating?

It combines optimistic, most likely, and pessimistic estimates using $\frac{O+4M+P}{6}$, where $O$, $M$, and $P$ are those estimates.

What makes a cost contingency a defensible planning allowance?

It is an explicit planning allowance for identified uncertainty, supported by risk analysis—not an unexplained cushion.

How does a budget differ from a cost estimate?

An estimate forecasts expected cost; a budget is authorized funding for the project or part of it.

What is a cost baseline?

It is the approved, time-phased budget used to measure and control cost performance. In common earned value practice, it includes authorized work and contingency reserve, but excludes management reserve.

How do Planned Value and Earned Value differ?

Planned Value (PV) is the budgeted value of work scheduled by the status date; Earned Value (EV) is the budgeted value of work actually completed.

What does Actual Cost measure in earned value management?

Actual Cost (AC) is the cost incurred for the work completed.

How is Cost Variance calculated, and what does a negative result mean?

Cost Variance is $\mathrm{CV}=\mathrm{EV}-\mathrm{AC}$. A negative result is unfavorable: completed work cost more than its budgeted value.

How is CPI calculated, and what does a value below $1.0$ signal?

Cost Performance Index is $\mathrm{CPI}=\frac{\mathrm{EV}}{\mathrm{AC}}$. Below $1.0$ indicates unfavorable cost efficiency; above $1.0$ indicates favorable efficiency.