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Question		Answer
Actual cost (AC) start learning		The actual amount of monies the project has spent to date.
Analogous estimating start learning		An approach that relies 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.
Budget estimate start learning		This estimate is also somewhat broad and is used early in the planning processes and also in top-down estimates. The range of variance for the estimate can be from –10 percent to +25 percent.
Commercial database start learning		A cost-estimating approach that uses a database, typically software-driven, to create the cost estimate for a project.
Contingency reserve start learning		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 and risk events.
Cost aggregation start learning		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.
Cost baseline start learning		A time-lapse exposure of when the project monies are to be spent in relation to cumulative values of the work completed in the project.
Cost budgeting start learning		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.
Cost change control system start learning		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.
Cost management plan start learning		The cost management plan dictates how cost variances will be managed.
Cost of quality start learning		The monies spent to attain the expected level of quality within a project. Examples include training, testing, and safety precautions.
Cost performance index (CPI) start learning		"Measures the project based on its financial performance. The formula is CPI
= EV/AC." start learning		= EV / AC. "
Cost variance (CV) start learning		The difference of the earned value amount and the cumulative actual costs of the project. The formula is CV = EV – AC.
Definitive estimate start learning		"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." start learning		The range of variance for the estimate can be from –5 percent to +10 percent. "
Direct costs start learning		"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)." start learning		long-distance phone charges, and so on). "
Earned value (EV) start learning		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.
Estimate at completion (EAC) start learning		These forecasting formulas predict the likely completed costs of the project based on current scenarios within the project.
Estimate to complete (ETC) start learning		"An earned value management 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." start learning		Three variations of this formula are based on conditions the project may be experiencing. "
Fixed costs start learning		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 to the project, and so on).
Funding limit reconciliation start learning		An organization’s approach to managing cash flow against the project deliverables based on a schedule, milestone accomplishment, or data constraints.
Indirect costs start learning		Costs that are representative of more than one project (for example, utilities for the performing organization, access to a training room, project management software license, and so on).
Known unknown start learning		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.
Learning curve start learning		An approach that assumes the cost per unit decreases the more units workers complete, because workers learn as they complete the required work.
Oligopoly start learning		A market condition where the market is so tight that the actions of one vendor affect the actions of all the others.
Opportunity cost start learning		The total cost of the opportunity that is refused to realize an opposing opportunity.
Parametric estimating start learning		An approach using a parametric model to extrapolate what costs will be needed for a project (for example, cost per hour and cost per unit). It can include variables and points based on conditions.
Planned value (PV) start learning		Planned value is the work scheduled and the budget authorized to accomplish that work. It is the percentage of the BAC that reflects where the project should be at this point in time.
Project variance start learning		The final variance, which is discovered only at the project’s completion. The formula is VAR = BAC – AC.
Reserve analysis start learning		Cost reserves are for unknown unknowns within a project. The management reserve is not part of the project cost baseline, but is included as part of the project budget.
Rough order of magnitude start learning		This rough estimate is used during the initiating processes and in top-down estimates. The range of variance for the estimate can be from –25 percent to +75 percent.
Schedule performance index (SPI) start learning		Measures the project based on its schedule performance. The formula is SPI = EV/PV.
Schedule variance (SV) start learning		The difference between the earned value and the planned value. The formulas is SV = EV – PV.
Single source start learning		Many vendors can provide what your project needs to purchase, but you prefer to work with a specific vendor.
Sole source start learning		Only one vendor can provide what your project needs to purchase. Examples include a specific consultant, specialized service, or unique type of material.
Sunk costs start learning		Monies that have already been invested in a project.
= (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 start learning		= (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)." start learning		- EV) / (EAC - AC). "
Variable costs start learning		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).
Variance at completion (VAC) start learning		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.

PMP 7#

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