2014.01.13 Assignment DetermineBudget SusieSchoonmaker

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  MeetUp Assignment for CAPM/PMP Study GroupJanuary 13, 2014Presenter: Susie SchoonmakerKnowledge Area: Project Cost ManagementProcess Group: Planning / Determine Budget  Knowledge Area Overview Project Cost Management establishes the policies, procedures and documentationfor planning, managing, expending and controlling project costs so that the projectcan be completed within the approved budget. The key bene󿬁t of this process is that itprovides guidance and direction on how the project costs will be managed throughoutthe project. Three step process:Estimate Costs: What do you think it will cost?  Determine Budget: In what categories?  Control Costs: How will you manage cost changes?   Process Group Overview: Determine Budget is the process of summing the estimated costs of individual work packages to establish the cost baseline. The key bene󿬁t of this process is that it providesthe cost baseline against which project performance can be monitored and controlled. PMBOK de󿬁nition: “Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.”   Inputs:ã Cost Management Planã Scope Baseline: Project Scope Statement, WBS and WBS Dictionaryã Activity Cost Estimates: cost estimates for each work packageã Basis of Estimates: supporting details for cost estimatesã Project Schedule: 󿬁nish and start dates can be used to aggregate costs per work periodsã Resource Calendars: may need to level resources to accommodate funding limitationsã Risk Register: includes information about how to aggregate costs for risk responsesã Agreements: any applicable information regarding purchase of products or servicesã Organizational Process Assets: budgeting policies, procedures and guidelines,cost budgeting tools, reporting methods    Tools and Techniques:ã Cost Aggregation : summing the costs for each work package ã Reserve Analysis : Contingency Reserves : “ known unknowns ”dollar or time value allocated for identi󿬁ed risks to ensure that the projectdoesn’t overrun available funding, controlled by Project Managerincluded in cost baseline and funding requirements Management Reserves : “unknown unknowns”, dollar value, set aside for unplanned, in-scope work,not included in cost baseline, included in funding requirementsmay be controlled by project sponsor or other senior managementã Expert Judgment: expertise appropriate for budgeting the projectã Historical Relationships : may provide data from parametric or analogous estimatesfor similar projects in the pastã Funding Limit Reconciliation : planned expenditures must meet any funding limits  Outputs: ã Cost Baseline Summation of time-phased budgets along a project timelineUsed to measure, monitor and control overall cost performance on projectBasis for comparison of actual expenditures to planned expendituresCan only be changed through formal change control proceduresAlso called Budget at Completion (BAC) or Performance Measurement Baseline Time-phased view of cost baseline typically displayed as an S-curveã Project Funding Requirements Project expenditures plus anticipated liabilitiesOutlined in incremental amounts, distributed over time as requiredã Project Documents Updates ã Risk Register ã Project Schedule   Practice Questions:1.The project cost baseline should include all of the following EXCEPT:a.Interest chargesb.Management reservesc.Corporate allocationsd.Equipment costs2.The Cost Performance Baseline is a time-phased budget and is used as a basisto measure, monitor, and control overall cost performance of the project. It isusually displayed in the form of:a.An S-chartb.A pie chartc.A histogramd.An S-curve3.Which of these are NOT inputs to Determine Budget?a.Basis of estimates, activity cost estimatesb.Project schedule, resource calendarsc.WBS Dictionaryd.Cost baseline, requirements traceability matrix4.Contingency Reserves are estimated costs to be used at the discretionof the project manager to deal with:a.Scope creepb.Anticipated but not certain events.c.Unanticipated eventsd.Anticipated and certain events5.Funding requirements for a project are usually in incremental amounts that are notcontinuous, and these appear as a step function in the graph depicting Cash 󿬂ow,Cost baseline and Funding. Any gap at the end of the project, between the fundsallocated and the cost baseline represents:a.Management reservesb.Contingency reservesc.Cost varianced.Charting error  Question for Discussion: 6.Jane is leading a small construction project for the 󿬁rst time. The responsible salesmanager already had some price discussions with the customer. Therefore she isunsecure if she should 󿬁rst estimate costs and then determine budget ordetermine the budget 󿬁rst and then estimate costs. What should she start with?a.Determine budget then estimate costs, because the sales manager alreadyhad price negotiations with the customerb.There is no binding order, because on some projects cost estimating and costbudgeting are so tightly linked that they are viewed as a single processc.Estimate costs then determine budget, because budget depends on the costsd.First she should ask the sales manager for the price, because costs are derivedfrom price.
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