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Unit 7
Compare actual cost to the original planned cost and analyze any variances between the two
Planning
Develop project management plan
Executing
Direct and manage project execution
Collect requirements
define scope Create WBS Define activities sequence Activity Estimate acitivity resources Estimate activity durations Develop schedule
Control costs
Identify stakeholders
Plan communications
Control thresholds - Variance thresholds for cost at designated time points in the project to indicate the agreed to amount allowable variance
Analogous Estimating
Parametric Estimating Bottom-Up Estimating Three-Point Estimates Reserve Analysis Cost of Quality (COQ) Project Management Estimating software Vendor Bid Analysis
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Outputs
Activity Cost estimates Basis of estimates Project document updates
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Contracts (Inputs)
Organizational Process Assets (Inputs) Existing formal and informal cost budgeting-related policies, procedures Cost budgeting tools,
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Funding Limit Reconciliation (Tool) The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project.
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Outputs
Cost performance baseline Project Funding Requirements Project document updates
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Organizational Process Assets (Input) Existing formal and informal cost control-related policies, procedures, Cost control tools; and Monitoring and reporting methods to be used
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Outputs
Work Performance Measurements Budget forecasts Change requests Recommended Corrective action Organizational Process Assets (Updates) Project management plan (Updates) Project document (Updates)
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1.
2. The actual cost or work performed (actual) An important part of Cost Control is to determine the cause of a variance, the magnitude of the variance, and to decide if the variance requires corrective action
EVT uses the Cost Baseline contained in the project management plan to assess project progress and the magnitude of any variations that occur
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SV = ( EV PV )
Cost Variance (CV) is a measure of cost performance on a project.
CV = ( EV AC )
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Schedule performance index (SPI) Is a measure of progress achieved compared to progress planned on a the project. SPI = ( EV / PV ) Cost performance index (CPI) Is a measure of the value of work completed compared to the actual cost on the project. CPI = ( EV / AC )
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Forecasting
Estimate At Completion (EAC) actual costs incurred for work completed, plus an estimate to complete (ETC) the remaining work.
EAC = ( AC + ETC )
EAC forecast for ETC work performed at the budgeted rate
= $430
BAC
AC
PV EV Time
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CV= EV - AC SV= EV - PV
Exercise
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5 pm Wednesday, Week 2
How much work should have been completed PV?
PLANNED Wall 1 100% = $ 1,000 Wall 2 Wall 3 Wall 4 PV 80% = $ 800 0% = 0 0% = 0 = $ 1,800
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5 pm Wednesday, Week 2
10 %
Wall 2
Wall 3 Wall 4
50 %
50% = $ 500
10% = $100 0% = 0 = $1,600
Total
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5 pm Wednesday, Week 2
Total Cost to date
AC = $ 2,250
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5 pm Wednesday, Week 2
Earned Value
PV $1,800
EV
AC
$1,600
$2,250
= $1,600 - $2,250
= ($650)
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5 pm Wednesday, Week 2
Performance Indices
PV $1,800
EV
AC
$1,600
$2,250
SPI
= EV / PV = $1,600 / $1,800 = .9
CPI
= EV / AC
= $1,600 / $2,250
= .7
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Questions
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1- Half way through the executing processes of your project, a team member alerts you to a potential cost overrun for a specific deliverable. What do you do first?
1- Half way through the executing processes of your project, a team member alerts you to a potential cost overrun for a specific deliverable. What do you do first?
B)EV
C ) Indirect D ) fixed
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D ) fixed
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3- A project manager has completed a detailed WBS and cost estimates for each work package. To create a cost baseline from this data, the project manager would :
A ) Use the highest level of the WBS to estimate analogously B ) Sum up the work package and risk contingency reserve estimates. C ) Roll up work package estimates into a project total and add managements reserves. D ) Gain expert opinions of the project costs.
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3- A project manager has completed a detailed WBS and cost estimates for each work package. To create a cost baseline from this data, the project manager would :
A ) Use the highest level of the WBS to estimate analogously B ) Sum up the work package and risk contingency reserve estimates. C ) Roll up work package estimates into a project total and add managements reserves. D ) Gain expert opinions of the project costs.
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4- You are having difficulty estimating the cost of your project. Which of the following BEST describes the most probable cause of your difficulty?
4- You are having difficulty estimating the cost of your project. Whish of the following BEST describes the most probable cause of your difficulty?
5- Which of the following represents the value of work we have actually completed? A ) Earned value
B ) Planned value
C ) Actual cost
D ) Estimate to complete
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5- Which of the following represents the value of work we have actually completed? A ) Earned value B ) Planned value C ) Actual cost D ) Estimate to complete
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6- While completing your project, you realized that you need to decrease the project costs. After researching your options, you came up with the following choices. Which choice would DECREASE project costs?
A ) Change to component A from component B. component A costs more to purchase, but has a lower life cycle cost than B. B ) Change activity A to be completed by resource B instead of resource c. resource B is more experienced worker. C ) Move activities B and H to occur concurrently, and accept a 30 percent increase in the risk that five more resources will be needed later. D ) Remove a test from the project management plan.
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6- While completing your project, you realized that you need to decrease the project costs. After researching your options, you came up with the following choices. Which choice would DECREASE project costs?
A ) Change to component A from component B. component A costs more to purchase, but has a lower life cycle cost than B. B ) Change activity A to be completed by resource B instead of resource c. resource B is more experienced worker. C ) Move activities B and H to occur concurrently, and accept a 30 percent increase in the risk that five more resources will be needed later. D ) Remove a test from the project management plan.
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7- If earned value (EV) is U.S.$300000, actual cost (AC) is U.S.$350000, and planned value (PV) is U.S. $375000, what does the schedule performance index (SPI) indicate?
A ) You are progressing at 86% of the rate originally planned. B ) You are progressing at 125% of the rate originally planned. C ) You are progressing at 116% of the rate originally planned. D ) You are progressing at 80% of the rate originally planned.
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7- If earned value (EV) is U.S.$300000, actual cost (AC) is U.S.$350000, and planned value (PV) is U.S. $375000, what does the schedule performance index (SPI) indicate?
A ) You are progressing at 86% of the rate originally planned. B ) You are progressing at 125% of the rate originally planned. C ) You are progressing at 116% of the rate originally planned. D ) You are progressing at 80% of the rate originally planned.
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9- Feasibility study answers the question can we do it? cost benefit analysis answer the question--------A ) Should we do it? B ) Are the safety risks acceptable?
9- Feasibility study answers the question can we do it? cost benefit analysis answer the question--------A ) Should we do it? B ) Are the safety risks acceptable?
10- What tool must project managers rely upon to accurately identify the costs associated with the project?
A ) A bill of materials B ) A Gantt chart
10- What tool must project managers rely upon to accurately identify the costs associated with the project?
A ) A bill of materials B ) A Gantt chart
Thank you
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