Exam 7: Determining Costs, Budget and Earned Value

In many cases, there will be a trade-off; reducing cost variances will involve a reduction in project scope or a delay in the project schedule.

Labour costs in the project costs estimate are the estimated costs for the various types or classifications of and are based on the estimated work time (not necessarily the same as the activity estimated duration) and the Rand labour rate for each.

The is the sum of the estimated costs of all the specific activities that make up a work package or the project.

Committed costs are also known as discharged or postponed costs.

The is the product of the percentage completed and the sum of the estimated costs of all the specific activities that make up a work package or the project.

There are two approaches to establishing the total budgeted cost for each work package:

The cost performance index (CPI) is a measure of the cost efficiency with which the project is being performed.If the cumulative earned value is greater than the cumulative actual costs, then

Based on analysis of actual cost it is possible to forecast what the total costs will be at the completion of the project or work package.

Materials costs in the project costs estimate are the estimated costs of materials that the project team or contractor

Often, the sum of the initial estimated costs is greater than the amount of funds budgeted by the sponsor.What should be done to arrive at an acceptable budget amount?

The budget for each work package is

The key to effective cost control is waiting to address negative cost variances and cost inefficiencies after they are identified.

Cost estimates should be unreasonable and excessive.

When the budgets for all the work packages are summed,

involves the following: analysing cost performance to determine which work packages may require corrective action; deciding what specific corrective action should be taken; and revising the project plan, including time and cost estimates, to incorporate the planned corrective action.

Historical data can be used as a guide on the current project.

The is the amount that was actually spent to achieve the work that was scheduled to be performed up to that point in time.

It's important that the person estimating the percentage complete not only assess how much work has been performed but also consider

If you put off corrective actions until some point in the distant future, the negative cost variance may deteriorate in the project.

It's crucial that cost variances and inefficiencies be identified early so that