PMP - Cost Management
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In earned value how is a cost variance calculated?
CV = EV - AC or BCWP - ACWP
In earned value how is CPI calculated?
EV / AC or BCWP / ACWP
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
Name two methods of accelerated depreciation
- 1. Double Declining Balance
- 2. Sum of the years digits
What is working capital
Current assets minus current liabilities
What is the purpose of a management reserve?
to reduce the chance of a cost overrun
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
IRR is ?
Internal Rate of Return - an estimate of a project's profitability expressed as a percentage - the higher the better
What is an approximate range of accuracy for a bottom up estimate?
-5 to +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
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
What would you like to do?
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