# PMP - Cost Management

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1. In earned value how is a cost variance calculated?
CV = EV - AC or BCWP - ACWP
2. In earned value how is CPI calculated?
EV / AC or BCWP / ACWP
3. What is the EAC and how is it calculated?
Estimate at Completion

• EAC = BAC / CPI
• assumes current performance will continue

• EAC = AC + (BAC-EV)
• assumes remaining work will be done at original budget rate

• EAC = AC + [(BAC-EV) / (CPI x SPI)]
• needed if you also have to consider effect of the schedule if you have an imposed firm deadline
4. Name two methods of accelerated depreciation
• 1. Double Declining Balance
• 2. Sum of the years digits
5. What is working capital
Current assets minus current liabilities
6. What is the purpose of a management reserve?
to reduce the chance of a cost overrun
7. What is value analysis and how does the process work?
• A cost reduction tool composed of four major steps
• 1. Analyze a proposed design
• 2. Determine relative cost of each function
• 3. Assess whether each function is really needed
• 4. Assess how to provide the necessary functions at the lowest cost without compromising quality or performance
8. IRR is ?
Internal Rate of Return - an estimate of a project's profitability expressed as a percentage - the higher the better
9. What is an approximate range of accuracy for a bottom up estimate?
-5 to +10%
10. What is cost control?
• 1. Influencing factors which create changes
• 2. Ensuring requested changes are agreed upon
• 3. Managing the actual changes as they occur
• 4. Determining that the cost baseline has changed
11. What is the learning curve theory?
The learning curve theory holds that costs will decrease as you get better at doing a repetitive task.

Unit costs will decrease in a regular pattern each time the number of units produced is doubled
 Author: cbass ID: 52080 Card Set: PMP - Cost Management Updated: 2010-11-29 01:25:49 Tags: PMP Folders: Description: PMP Cost Management Review Show Answers: