Cost Estimation & Budget Control Flashcards

An S-curve in project cost management is used to represent:

Answer: Cumulative planned and actual costs over time

An S-curve plots cumulative planned value, earned value, and actual cost over time, showing typical slow-start, rapid-mid, and tapering-end cost patterns.

Which technique involves identifying and quantifying the uncertainties in cost estimates using probability distributions?

Answer: Monte Carlo simulation

Monte Carlo simulation runs thousands of iterations using probability distributions for each cost element to produce a range of possible total costs.

A contractor is awarded a Cost-Plus-Incentive-Fee (CPIF) contract. The fee increases when:

Answer: Actual costs are lower than the target cost

In CPIF contracts, the contractor earns a higher fee when actual costs come in below the target cost, incentivizing cost efficiency.

Variance at Completion (VAC) is calculated as:

Answer: BAC - EAC

VAC = BAC - EAC, representing the expected final cost variance (positive = under budget, negative = over budget) at project completion.

Which element of the Work Breakdown Structure (WBS) is typically the lowest level used for cost estimation?

Answer: Work package

Work packages are the lowest WBS level where costs can be reliably estimated, scheduled, and tracked.

A project cost estimate that accounts for price escalation over a multi-year project is called:

Answer: An escalated or inflated estimate

An escalated estimate adjusts future-year costs for expected inflation or price increases over the project duration.

When should a project manager formally request a change to the cost baseline?

Answer: When an approved scope change impacts the project budget

Cost baseline changes require an approved scope change through the integrated change control process; cost overruns alone do not justify re-baselining.