PMPCostManagement.docVIP

 PAGE \* MERGEFORMAT 4 Cost Management Cost Management Objective: Project complete within the approved budget EXAM Hot Topic: 1) Earn Value 2) Project Selection Method (NPV, IRR …) 3) Accounting Terms Cost Management Plan Subsidiary Plan of PM Plan it includes unit of measure, level of accuracy, organization procedure link (Control Account) etc Type of Cost Variable Cost: e.g. material, labor cost Fixed Cost: e.g. rental, setup cost Direct Cost: e.g. wage Indirect Cost: e.g. overhead, tax Estimate Cost use the same estimate technique in Time Management Bottom – up: work package cost are rolled – up to higher level contingency reserve = put in budget management reserve = won’t put in budget, but in funding Cost of Quality (COQ) = Conformance Cost + Non – Conformance Cost Determine Budget Budget = Cost Baseline != Funding Funding = Budget + Management Reserve Activity = roll up = Work Package = Control Account = Project Cost (Cost Aggregation) Cost Performance Baseline = S – Curve Funding Requirement = Step – Wise Function Control Cost c.f. budget (baseline) vs actual rough performance measurement: 50/50 rule, 20/80 rule, 0/100 rule Earn Value Management (EVM) = Performance Measurement Noted that control cost result in Change Request EVM Formula PV = Planned Value CV = Cost Variance EV = Earned Value SV = Schedule Variance AC = Actual Cost CPI = Cost Performance Index SPI = Schedule Performance Index Tricks 1) EV come first 2) if variance, minus sth. 3) if index, divide by sth. 4) if related to cost, use AC 5) if related to schedule, use PV 6) –ve or 1 means bad CV = EV – AC SV = EV – PV CPI = EV / AC SPI = EV / PV Planned e.g. TASK: Paint 10 wall Each wall cost $1k Paint 1 wall per day Actual Today is end of day 3 2.5 wall being painted cost = $4k Solution: AC = $4k (Given PV = $1k x 3 = $3k CV = $2.5k - $4k = -$1.5k (over budget) SV = $2.5k - $3k = -$500 (behind schedule) CPI = 2.5/4 = 0.625 SPI = 2.5/3 = 83.3% Forecasting Formula EAC = Estim