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.