#### Order Materials - PMP Certification 6th Edition Exam - Combo Pack

This fully updated, 400-page guide comes complete with a 1000 question exam simulation application. Written by the same author of our award-winning PMP boot camps, this combo provides all the information project managers need to thoroughly prepare for the test. This course manual/exam simulator combo pack features:

• 400-page printed, EZ-Flip manual.
• 1000 question web-based, exam simulator
• 10 knowledge areas and 49 process groups.
• 1670 exam-based sample questions.
• 8 simple strategies for EV formula and ITTO mastery.
Call 800-544-1995 to order this combo pack today! Get both for only \$109.

#### Project Cost Management

PREV: Schedule       UP NEXT: Risk

This chapter covers key concepts related to Project Cost Management.

1. The knowledge area of Project Cost Management consists of the following processes -

Project Cost Processes

Process Project Phase Key Deliverables
Plan Cost Management Planning
Estimate Costs Planning Activity Cost Estimates,Basis of estimates
Determine Budget Planning Cost performance baseline
Control Costs Monitoring and Controlling Work performance measurements

2. Alternative identification process identifies other solutions to an identified problem.
3. Value Analysis approach is used to find more affordable, less costly methods for accomplishing the same task.
4. The Estimate Costs process takes the following inputs -
• Scope baseline
• Project schedule
• Human resource plan
• Risk register
• Enterprise environmental factors
• Organizational process assets
5. Depreciation is technique used to compute the estimated value of any object after few years. There are three type of depreciation techniques. These are
• Straight line depreciation The same amount is deprecated (reduced) from the cost each year.
• Double-declining balance - In the first year there is a higher deduction in the value - twice the amount of straight line. Each year after that the deduction is 40% less than the previous year.
• Sum of year depreciation - Lets say the life of an object is five years. The total of one to five is fifteen. In first year we deduce 5/15 from the cost, in second year we deduce 4/15, and so on.
6. Analogous Estimating is an estimating technique with the following characteristics -
• Estimates are based on past projects (historical information)
• It is less accurate when compared to bottom-up estimation
• It is a top-down approach
• It takes less time when compared to bottom-up estimation
• It is a form of an expert judgment
7. In Parametric Modeling Estimation, you use a mathematical model to make an estimate. It is of two types.
• Regression Analysis
• is a mathematical model based upon historical information.
• Learning Curve model is based upon the principal that the cost per unit decreases as more work gets completed.
8. Bottom up estimation is same as WBS estimation. It involves estimating each work item and adding the estimates to get the total project estimate.
9. You can expect five to ten questions related to Earned Value Management. These are generally pretty simple once you have good understanding of the concepts, and remember the formulae. These formulae are explained below.

10. Planned Value (PV) refers to what the project should be worth at this point in the schedule. It is also referred as BCWS (Budgeted Cost of Work Scheduled).
11. Earned Value (EV) is the physical work completed to date and the authorized budget for that. It is also referred as BCWP (Budgeted Cost of Work Performed).
12. Actual Cost (AC) is the actual amount of money spent so far. It is also referred as ACWP (Actual Cost of Work Performed).
13. Estimate At Completion (EAC) refers to the estimated total cost of the project at completion.
14. CPI refers to Cost Performance Index. It is defined as
`CPI = EV/AC`
If CPI is less than 1, this means that the project is over budget.
15. BAC refers to Budget at Completion. It is related to EAC.
`EAC = BAC/CPI`
16. ETC refers to Estimate to Completion. It is defined as
`ETC = EAC - AC`
17. CV refers to Cost Variance. It is defined as
`CV = EV - AC`
18. SV refers to Schedule Variance. It is defined as
`SV = EV - PV`
Negative cost or schedule variance means that project is behind in cost or schedule.
19. SPI refers to Schedule Performance Index. It is defined as
`SPI = EV/PV`
20. VAC refers to Variance At Completion. It is defined as
`VAC = BAC - EAC`
21. The process of Cost budgeting defines time phased cost estimates for the project. For example, in the first month the project will require \$10,000. Cost estimating involves defining cost estimates for tasks. Cost budgeting defines cost estimates across time.
22. The tools and techniques used for Estimate Costs are -
• Expert judgment
• Analogous estimating
• Parametric estimating
• Bottom-up estimating
• Three-point estimates
• Reserve analysis
• Cost of quality
• Project Management estimating software
• Vendor bid analysis
23. Cost baseline refers to what is expected to be spent on the project. It is usually an S-curve. That is the expenditure is less in the beginning, and the end. The expenditure is maximum during the middle of the project.
24. The after project costs are called life cycle costs.

Questions on Project Cost Knowledge area are available in Cost Questions.

UP NEXT: Risk

#### Upcoming Classes

NOV 5
##### Atlanta PMP Certification

November 5-8, 2018

Sandy Springs, GA 30319

Save up to \$300 when you register early. Call 800.544.1995

OCT 22
##### Boston PMP Certification

October 22-25, 2018

Boston, MA 02166

Save up to \$300 when you register early. Call 800.544.1995.

NOV 5
##### Chicago PMP Certification

November 5-8, 2018

Chicago, IL 60601

Save up to \$300 when you register early. Call 800.544.1995.

OCT 22
##### Houston PMP Certification

October 22-25, 2018

Houston, TX 77079

Save up to \$300 when you register early. Call 800.544.1995.

NOV 12
##### Online PMP Certification

November 12-15, 2018

Virtual

Save up to \$300 when you register early. Call 800.544.1995.

OCT 22
##### Washington DC PMP Certification

October 22-25, 2018

Washington, DC 20001

Save up to \$300 when you register early. Call 800.544.1995.

#### Testimonials

• I took the boot camp last Monday thru Thursday and I passed my PMP, on my first attempt, on Friday afternoon.

Lorna Lavelle, PMP
• I took my bootcamp last week and passed the next day. My instructor was easily one of the best instructors I've ever had.

Timothy Hopkins, PMP
• I leveraged the course as somewhat of a capstone to my preparation period. I took the exam the very next day after the boot camp ended, and passed.