PMP 5th Edition - Acronyms

Card Set Information

PMP 5th Edition - Acronyms
2013-10-06 20:50:47
PMP 5th Edition Acronyms

PMP 5th Edition - Acronyms
Show Answers:

  1. What is ROM?
    Rough Order of Magnitude estimate 

    This estimate is REALLY rough! It’s got a range of-50% to +50%, which means it can be anywhere from half to one and a half times the actual cost! So you only use it at the very beginning of the project.
  2. What is BCR?
    Benefit cost ratio (BCR)

    This is the amount of money a project is going to make versu show much it will cost to build it. Generally, if the benefit is higher than the cost, the project is a good investment.
  3. What is NPV?
    NPV = Net present value NPV This is the actual value at a given time of the project minus all of the costs associated with it. This includes the time it takes to build it and labor as well as materials. People calculate this number to see if it’s worth doing a project.

    Money you’ll get in three years isn’t worth as much to you as money you’re getting today. NPV takes the “time value” of money into consideration,so you can pick the project with the best value in today’s dollars.
  4. Define Opportunity cost
    Opportunity cost

    When an organization has to choose between two projects,they are always giving up the money they would have made on the one they don’t do. That’s called opportunity cost. It’s the money you don’t get because you chose not to do a project.

    If a project will make your company $150,000, then the opportunity cost of selecting another project instead is $150,000 because that’s how much your company’s missing out on by not doing the project.
  5. What is IRR?
    Internal rate of return

    This is the amount of money the project will return to the company that is funding it. It’s how much money a project is making the company. It’s usually expressed as a percentage of the funding that has been allocated to it.
  6. Define Depreciation in relation to project management?

    This is the rate at which your project loses value over time. So,if you are building a project that will only be marketable at a high price for a short period of time, the product loses value as time goes on.

    There are a few numbers that will appear on the test as definitions. You won’t need to calculate these, but you should know what each term means.
  7. What is Lifecycle costing
    Lifecycle costing

    Before you get started on a project, it’s really useful to figure out how much you expect it to cost—not just to develop, but to support the product once it’s in place and being used by the customer.
  8. Cost Aggregation
    Cost Aggregation is rolling up costs from the work package level to the control account level so that the numbers can be followed down through the WBS hierarchy.
  9. What is Management Reserve
    A Management Reserve is money set aside to cover unplanned,unexpected costs. Your project’s funding requirements need to cover both the budget in the Cost Performance Baseline and the management reserve.
  10. What is EVM?
    Earned Value Management

    Here’s where you measure how your project is doing compared to the plan. This involves using the earned value formulas to assess your project.
  11. What is BAC?
    Budget At Completion

    How much money are you planning on spending on your project? This is the first number you think of when you work on your project costs. It’s the total budget that you have for your project—how much you plan to spend on your project.
  12. What is PV?
    Planned Value:

    If you look at your schedule and see that you’re supposed to have done a certain percentage of the work, then that’s the percent of the total budget that you’ve “earned” so far. This value is known as Planned Value. The total of the PV is sometimes referred to as the performance measurement baseline (PMB).

    • This is how much of your budget you planned on using so far. If the BAC is $200,000, and the schedule says your Planned % Complete is 30%, then the Planned Value is $
    • 200,000 × 30% = $60,000

    PV = (BAC) × (% Complete)
  13. What is EV?
    Earned Value

    Earned Value tells you how you’re doing here’s how you calculate it.

    BAC x (Actual % Complete)

    EV—Earned Value This figure tells you how much your project actually earned. Every hour that each team member works adds value to the project. You can figure it out by taking the percentage of the hours that the team has actually worked and multiplying it by the BAC. If the total cost of the project is $200,000, then the

    Earned Value is $200,000 × 35% = $70,000.

    Remember, EV measures the work that’s been done, while AC tells you how much you’ve spent so far.
  14. What is SPI?
    Schedule Performance Index (SPI)

    If you want to know whether you’re ahead of or behind schedule, use SPIs. The key to using this is that when you’re ahead of schedule, you’ve earned more value than planned! So EV will be bigger than PV. To work out your SPI, you just divide your EV by your PV.

    SPI = EV / PV

    • If SPI is greater than one, that means EV is bigger than PV, so you’re ahead of schedule!
    • If SPI is less than one, then you’re behind schedule because the amount you’ve actually worked (EV) is less than what you’d planned (PV).
  15. What is SV?
    Schedule Variance (SV)

    It’s easy to see how variance works. The bigger the difference between what you planned and what you actually earned, the bigger the variance. So, if you want to know how much ahead or behind schedule you are, just subtract PV from EV.

    SV = EV - PV
  16. What is AC?
    Actual Cost (AC)

    That’s the amount of money that you’ve spent so far on the project. 

    Remember, EV measures the work that’s been done, while AC tells you how much you’ve spent so far.
  17. What is CPI?
    Cost Performance Index (CPI)

    If you want to know whether you’re over or under budget, use CPI.  CPI is greater than or equal to 1 and CV is positive. When this happens, your actual costs are less than Earned Value, which means the project is delivering more value than it costs. CPI is less than 1 and CV is negative. When your actual costs are more than earned value, that means that your sponsor is not getting his money’s worth of value from the project.

    CPI = EV / AC
  18. What is CV?
    Cost Variance (CV)

    This tells you the difference between what you planned on spending and what you actually spent. So, if you want to know how much under or over budget you are, just take AC away from EV.

    Remember what CV means to the sponsor: EV says how much of the total value of the project has been earned back so far. If CV is negative, then he’s not getting good value for his money.

    CV = EV - AC
  19. What is Forecasting?
    The idea behind forecasting is that you can use Earned Value to come up with a pretty accurate prediction of what your project will look like when it’s at completion.

    If you know your CPI now, you can use it to predict what your project will actually cost when it’s complete. Let’s say that you’re managing a project with a CPI of 0.8 today. If you assume that the CPI will be 0.8 for the rest of the project—and that’s not an unreasonable assumption when you’re far along in the project work—then you can predict your total costs when the project is complete. We call that Estimate at Completion (EAC).

    Estimate at Completion (EAC) here is one way to calculate it:

    • Estimated budget at completion
    • EAC = BAC / CPI

    • Estimated Schedule at completion
    • (Total Planned Hrs) / SPI = hrs @ completion

    • cost Variance at Completion (VAC)
    • VAC= BAC - New BAC
  20. What is EAC or New BAC?
    Estimate at Completion (EAC)

    Here is one way to calculate it:

    • Estimated budget at completion
    • EAC = BAC / CPI 
    • Estimated Schedule at completion
    • (Total Planned Hrs) / SPI = hrs @ completion cost

    • Variance at Completion (VAC)
    • VAC= BAC - New BAC
  21. What is ETC?
    Estimate to Complete (ETC), which tells you how much more money you’ll probably spend on your project.  Since EAC predicts how much money you’ll spend, if you subtract the AC, you’ll find out how much money the rest of the project will end up costing.

    ETC = EAC - AC
  22. What is VAC?
    Variance at Completion (VAC), predicts what your variance will be when the project is done. If you end up spending more than your budget, the VAC will be negative… just like CV and SV!

    VAC = BAC - EAC
  23. Define Variance Analysis:
    Throughout your project, you are looking at how you are doing as compared to your plan. The variance between planned and actual performance needs to be carefully analyzed so you can head off problems before they make your project go over budget.
  24. What is TCPI?
    To-Complete Performance Index

    The to-complete performance index (TCPI) is a number that represents a target that your CPI would have to hit in order to hit your forecasted completion cost.There are two different formulas for TCPI. One is for when you’re trying to get your project within your original budget, and the other is for when you are trying to get your project done within the Estimate At Completion you’ve determined from Earned Value Calculations.

    • Trying to get the project within Budget:
    • TCPI = (BAC-EV) / (BAC-AC)

    How much budgeted work is left divided by how much budgeted money is left.

    • Trying to get the project done within the Estimate At Completion (EAC)
    • TCPI = (BAC-EV) / (EAC-AC)

    How much budgeted work is left divided by how much estimated money is left.

    The higher the number, the more you’re going to have to rein in spending on your project and cut costs.

    When the number is lower than one, you know you’re well within your budget and you can relax a bit.
  25. What is Quality?
    Quality is the measurement of how closely your product meets its requirements.
  26. Define the quality management plan?
    The quality management plan gives you what you need to manage quality. The Quality Management Plan is the main output of Plan Quality. It’s a sub-plan of the project management plan.

    The Quality Management Plan is the main tool for preventing defects on your project.
  27. Quality vs. grade
    Quality means that something does what you needed it to do. Grade describes how much people value it.
  28. What is fitness for use?
    Fitness for use is about making sure that the product you build has the best design possible to fit the customer’s needs.
  29. Conformance to requirements
    Conformance to requirements is the core of both customer satisfaction and fitness for use. Above all, your product needs to do what you wrote down in your requirements  specification. Your requirements should take into account both what will satisfy your customer and the best design possible for the job.

    Quality is a measure of how well your product does what you intend.
  30. What does Plan Quality mean?
    Plan Quality is like the other planning processes you’ve learned about—you create a Quality Management Plan to help guide you and your team through quality activities.
  31. What is a Cost-benefit analysis?
    Cost-benefit analysis is looking at how much your quality activities will cost versus how much you will gain from doing them. The costs are easy to measure; the effort and resources it takes to do them are just like any other task on your schedule.
  32. What is Cost of quality?
    Cost of quality is what you get when you add up the cost of all of the prevention and inspection activities you are going to do on your project. It doesn’t just include the testing. It includes any time spent writing standards, reviewing documents, meeting to analyze the root causes of defects, rework to fix the defects once they’re found by the team—absolutely everything you do to ensure quality on the project.
  33. What is Benchmarking?
    Benchmarking means using the results of Plan Quality on other projects to set goals for your own. You might find that the last project your company did had 20% fewer defects than the one before it. You would want to learn from a project like that and put in practice any of the ideas they used to make such a great improvement. Benchmarks can give you some reference points for judging your own project before you even get started with the work.
  34. What is Design of experiments?
    Design of experiments is where you apply the scientific method to create a set of tests for your project’s deliverables. It’s a statistical method, which means you use statistics to analyze the results of your experiments to determine how your deliverables best meet the requirements.
  35. What is Flowcharting?
    Flowcharting means coming up with a graphical depiction of the the process you’re doing so that you can anticipate where quality activities might help you prevent defects.
  36. What is a Control Chart?
    Control charts are used to figure out which processes in your company might be having quality problems. They’re used for measuring the performance of activities that are done over and over.
  37. What is a Statistical sampling?
    Statistical sampling is when you look at a representative sample of something to make decisions. For example, you might take a look at a selection of widgets produced in a factory to figure out which quality activities would help you prevent defects in them.
  38. How can you use checklists?
    Checklists are there to help people head off mistakes that might cause defects. Checklists can also be used for inspecting products to be sure that they display specific characteristics.
  39. What is a Process Improvement Plan
    Process Improvement Plan is a plan for improving the process you are using to do the work. In it, you come up with strategies for finding inefficiencies and places where the way you work might be slowing you down or creating a low quality product. You set goals for how you can monitor the process during your project and make recommendations to make it better
  40. What is Quality Control?
    Quality Control is in the Monitoring & Controlling process group. Like Scope Control and Cost Control, you look at the work performance information that is coming from your project and compare it to your plan. If there are problems, you recommend a change. That way you can either fix the problem or make sure that it doesn’t happen again.
  41. Control Charts
    Control Charts are a way of visualizing how processes are doing over time.
  42. Cause and effect diagrams are also called Fishbone and Ishikawa diagrams
    Cause and effect diagrams are also called Fishbone and Ishikawa diagrams.They are used to figure out what caused a defect. You list all of the categories of the defects that you have identified and then write the possible causes of the defect you are analyzing from each category.

    Fishbone diagrams help you see all of the possible causes in one place so you can think of how you might prevent the defect in the future
  43. Pareto charts
    Pareto charts help you to figure out which problems need your attention right away. They’re based on the idea that a large number of problems are caused by a small number of causes. In fact, that’s called the 80/20 rule—80% of the defects are usually caused by 20% of the causes. Pareto charts plot out the frequency of defects and sort them in descending order.
  44. Flowcharts
    Flowcharts let you show how processes work visually. You can use a flowchart to show how the tasks in your project interrelate and what they depend on. They are also good for showing decision-making processes.

    First, the high-level scope is decided, then the requirements, and then the design. After design there is a decision to be made: Does the design pass a review? If yes, then move on to the build phase; if no, there’s still some design work to do. After the build process, the product needs to pass its unit tests to make it into the test phase.

    The flowchart helps you to see how all of the phases relate to each other. Sometimes the way you are working is responsible for defects in your product. Flowcharts help you get a handle on the way you are working by showing you a picture of the whole process.
  45. Histograms
    Histograms give you a good idea of how your data breaks down. If you heard that your product had 158 defects, you might think that they were all critical. A lot of the bugs are low priority. It looks like only 28 or so are critical. Histograms are great for helping you to compare characteristics of data and make more informed decisions.
  46. Run charts
    Run charts tell you about trends in your project by showing you what your data looks like as a line chart. If the line in the chart were the number of defects found in your product through each quality activity, that would tell you that things were getting worse as your project progressed.
  47. Scatter diagrams
    Scatter diagrams show how two different types of data relate to each other.
  48. Change Requests
    Change Requests are recommended or preventative actions that also require changes to the way you are doing your project.

    Those kinds of changes will need to be put through change control, and the appropriate baselines and plans will need to be updated if they are approved.
  49. Inspection means
    Inspection means checking each deliverable for defects. That means checking your specs and your documentation, as well as your product, for bugs.
  50. What does the rule of seven means
    The rule of seven means that any time you have seven data points in a row that fall on the same side of the mean on a control chart, you need to figure out why.