Cost Management Knowledge Area and related practice exams

Cost Management includes the processes involved in estimating, budgeting and controlling costs so that the project can be completed within the approved budget. In this article we are going to discuss in-detail about various processes that form a part of the Cost Management knowledge area, their inputs, tools and techniques, outputs. We'll be also discussing in detail on where they fit into project management framework.Various processes that constitute the cost management knowledge area includes : 1) Estimate Costs 2) Determine Budgets 3) Control Costs Here are some pmp cost management related practice exams 1. What is the term that is used to express how the cost savings or cost overrun will be shared with the buyer? a. Target Price b. Sharing Ratio c. Ceiling Price d. Price 2. What is the term that indicates the highest price the buyer will pay? a. Target Price b. Sharing Price c. Ceiling Price d. Price 3. What is term that often used to compare the end result with what was expected as a measure of success? a. Target Price b. Sharing Price c. Ceiling Price d. Price 4. What is the term that is used to refer to the amount above which the seller bears all the loss of a cost overrun? a. Price b. Fee c. Ceiling Price d. Point of total assumption 5. What is the term that refers the amount the seller charges the buyer? a. Price b. Fee c. Ceiling Price d. Point of total assumption 6. What is the type of procurement document that request a total price to do all the work? a. Request for Quotation b. Request for Proposal c. Invitation for Bid d. Invitation for Proposal 7. What is the type of procurement document request the detailed information on how the work will be accomplished including all details of who will do the work, their credentials etc? a. Request for Quotation b. Request for Proposal c. Invitation for Bid d. Invitation for Proposal 8. What is the type of procurement document that request price quote per hour of work? a. Request for Quotation b. Request for Proposal c. Invitation for Bid d. Invitation for Proposal 9. What type of agreement that buyer and seller enters into confidentiality of not disclosing the negotiations to the outside public or any other third party? a. Teaming Agreement b. Standard Contract c. Nondisclosure Agreement d. Special Provisions 10. What type of agreement that buyer and seller enter into so that they can make a joint bid to win a contract? a. Teaming Agreement b. Standard Contract c. Nondisclosure Agreement d. Special Provisions 11. The project manager during procurement negotiation told the other party that they can hold the negotiation for another week since his senior management officials are on vacation. What kind of negotiation tactics the project manager is using? a. Deadline b. Missing man c. Delay d. Withdrawal 12. The project manager told the representative of the other party during negotiation of the procurement contract that the personnel doesn’t have the authority to talk to him during procurement contract negotiation? a. Deadline b. Limited authority c. Extreme Demands d. Attacks 13. The project manager was talking to the other party personnel during procurement contract negotiation that he doesn’t have the experience to deal with contract negotiation. What kind of negotiation tactics the project manager is using? a. Attacks b. Personal Insults c. Good Guy/Bad Guy d. Lying 14. The project manager remarked that the contract is a done deal and both parties must stick to the terms of the contract. What kind of negotiation tactics the project manager is using? a. Fair and reasonable b. Fait accompli c. Deadline d. Good Guy/Bad Guy 15. The project manager told the other party during contract negotiation that although his boss is not available for final approval of the contract we can go ahead with the contract signing. What kind of contract negotiation tactics the project manager is using? a. Missing man b. Good Guy/Bad Guy c. Deadline d. Fait accomplished Cost management starts with cost estimation : Estimate costs is a process in cost management knowledge area. It is the first process in cost management knowledge area.It is the process in which cost estimate for each activity is made. Estimate costs process is followed by cost budgeting where the overall spending plan or budget is formulated. Cost estimation estimates all the costs. These include : 1) Costs of quality efforts 2) Costs of risk efforts 3) Costs of the project managers time 4) Costs of project management activities 5) Costs directly associated with the project 6) Office expenses 7) Overhead costs including salaries, office expenses For estimating costs, we use the following inputs : 1) Scope baseline 2) Project schedule 3) Human resource plan 4) Risk register 5) Enterprise environmental factors 6) Organizational process assets Tools And Techniques 1) Bottom-up estimating 2) Expert judgement 3) Analagous estimating 4) Parametric estimating 5) Three-point estimates 6) Reserve analysis 7) Cost of quality 8) Project management estimating software 9) Vendor bid analysis Outputs of Estimate Costs : 1) Activity cost estimates 2) Basis of estimates 3) Project document updates Cost management a crucial knowledge area in Project management is composed of many processes. Few important ones are cost estimating and cost budgeting. Often these two terms are confusing. Cost estimating is the process of calculating the cost needed to accomplish a task(activity level or work package(combination of activities leads to work package)).This combines contingency reserves. Contingency reserve is the amount set aside by the management to respond to identified risks. Cost budgeting is the compilation process used to compile the cost estimates. This represents the overall amount needed to execute the project.. It combines in itself management reserve which is the amount set aside by management to tackle unforseen(unplanned) risks. Following processes form an integral part of risk management knowledge areas. 1) Risk management plan development 2) Risk planning 3) Risk identification 4) Qualitative risk analysis 5) Quantitative risk analysis 6) Risk response control