What is Earn Value Management (EVM)

Earn Value Management (EVM) is:

• a methodology that measures project progress by comparing actual schedule and cost performance against planned performance as laid out in the schedule and cost baseline.

Variables in EVM:

• EMV involves calculating three independent variables to assess and monitor project cost and schedule performance progress. Those variables are:
  - Planned Value (PV)
  - Earned Value (EV)
  - Actual Cost (AC)
  
• These 3 variables are used to provide measures of whether or not work is being accomplished as planned and to forecast project cost at completion.
  

Cost Control and Performance Review in PMP

Cost control is the process of monitoring cost performance and controlling changes to the cost baseline.

Performance reviews are meetings held to review schedule activity, work package or cost account status and progress.

What is Contingency Allowances in Cost Budget?

For Contingency Allowances,

• When considering adding a contingency allowance to your budget:
  - Avoid contingency.
  - Based on the WBS input, make sure that the work package do not already have a contingency amount tacked onto the base estimate.
  
  
• Inform the project team.
  - Let them know that the project will be managed against a point estimate without contingency.
  
  
• As project manager, you must release contingency funds only through closely controlled and well documented process, which is typically included in the cost management plan.
  
  
• Contingency is not to be used as a slush fund without controls.

What is Cost Baseline?

A cost baseline

• is a time-phased budget that will monitor and measure cost performance throughout project life cycle.
• includes a budget contingency to accommodate the risk of incurring unidentifiable but normally occurring costs witin the defined scope.
• varies from project to project, depending on each project's unique budget and schedule.

Introducing Cost Budgeting in PMP

Cost budgeting:

• is the process of allocating the overall cost estimates to individual activities or work packages across the project life cycle.
• is to establish a cost baseline for measuring the project's cost performance

Bottom-Up Cost Estimation in PMP

Bottom-Up Cost Estimation is:

• an estimating the cost for each work package in the WBS.
• the most accurate method but it is also the most challenging, costly and time consuming.

Parametric Cost Estimation in PMP

Parametric Cost Estimation is:

• a mathematical models to develop cost estimation.
• developed for specific project parameters or characteristics.
• an estimation that can be simple or complex depending on the item being estimated. Most parametric models involve some kind of multiplier.
• considered to provide a rough order of magnitude or approximate level of accuracy.

Analogous Cost Estimation in PMP

Analogous Cost Estimation is:

• a method in which top managers use their experience, historical information from similar projects and expert judgement to determine a total project cost or time estimation.
• often called "top-down" estimation since estimations are generated for top levels of the WBS and then apportioned downward through the levels of WBS.

Analogous Cost is used when:

• you hae a limited amount of detailed information about the project.
• you have a similar project to use for comparison.
• the work package owners preparing the estimations have the requisite expertise.

Direct and Indirect Costs

What is the difference between Direct and Indirect Costs?

• Direct Cost
  Costs that are directly attribute to work on the project.
  eg. training cost, travel cost, wages, cost of material used in the project, etc
  
  
• Indirect Cost
  Overhead items or costs incurred for the benefit of more than one project.
  eg. taxes, fringe benefits, etc

Variable and Fixed Costs

What are the difference between Variable and Fixed Cost?

• Variable Cost
  It is the cost that changes with the amount of production or the amount of work.
  eg. Wages, cost of material, etc
  
  
• Fixed Cost
  It is the costs that do not change as production changes.
  eg. one-time setup cost, rental cost, etc

What is Cost Estimation in PMP

What is Cost Estimation?

• It is the process of projecting the cost of resources that are necessary for the completion of your project.
• It involes identifyng and considering cost alternatives.

Project Cost Management in PMP

I would like to start a new topic on Project Cost Management. Project Cost Management is one of the major topic in PMP and it consists of the following 3 major topics:

• Cost Estimation
  It is developing an approimation of the costs of the resources needed to complete all project activities.
  
  
• Cost Budgeting
  It is aggregating the estimated costs of individual activities or establish a cost baseline.
  
  
• Cost Control
  It is infuencing the factors that create cost variances and control changes to the project schedule.