ISTM 630 | Final Exam ACTUAL UPDATED QUESTIONS AND CORRECT ANSWERS
Cost Management Overview strong connection with time management, both very hard
cost = sacrifice to achieve something, MANAGEMENT = complete project in
approved budget (more expensive later)
OTHER Cost Management Vocab Value Analysis: cheaper way of doing the same work
Cost Risk
Life Cycle Costing PHASES: 1. initial costs (+ customization, integration)
2. Installation/Develop (labor deploy)
3. Operation Costs (support, subscriptions)
4. SCALING? (adding more capacity as growth continues)
5. Maintenance & Upgrades (performance tuning), AFFORD AFTER WARRANTY?
(# years out)
6. Downtime/Contingency
7. End of Life, Disposal (data migration out)
Planning Cost Management plan/manage/control costs
techniques: ROI analysis, discounted cash flow
Estimate Costs to anticipate costs vs benefits
include costs of quality efforts, risk efforts (mitigation), PM's time, activities, etc.
Types of cost direct (travel, wage, recognition), indirect (tax, benefits, janitor)
variable (wages), fixed (utilities)
Estimate cost inputs management plan, scope baseline, risk, historic examples, PM COSTS
schedule (cost timing and buying plan)
HR plan (pay)
Methods of estimating cost same as time:
one-point: historic data, expert, guess
Analogous: top-down (historic)
Parametric: relationship between variables, data, regression analysis
, Cost Management Principles tangible costs or benefits are measured in dollars (you can't with intangibles)
direct costs produce the products/services in a project, indirect costs indirectly
perform the project
sunk costs are already spent, don't effect decisions (future ONLY)
Prospect Theory Sunk costs: decision makers continue to pursue project they spent money on
(throw good money after bad)
sunk costs arise from new tech making older investments obsolete
Cost Management Terms needed for IT managers to speak the language:
LIFE CYCLE COSTING: total cost of ownership, DEVELOP + SUPPORT
CASH FLOW ANALYSIS: annual cost/benefits + annual cash flow
RESERVES: in estimate, mitigate risk by adding money for potential troubles
(contingency if planned for, management if unknown)
Learning Curve Theory when many items are produced repetitively, the unit cost decreases in a regular
pattern as more units are produced.
COCOMO Constructive Cost Model (by Barry Bohem): for software development
parameters = function points (tech independent assessments of things to develop
system)
SOLC (source of lines code) = human written code
Only PARAMETRIC MODELS NOT RISK TO HUMAN DECISIONS
Function Point Estimation Steps 1. System Size (inputs/outputs/etc. x complexity for TOTAL FUNCTION
MEASUREMENT), adjust/review, convert to CODE
2. Effort based on size and production rate of function
3. Scheduled Time
Determining Budget Cost baseline - part of budget PM can control (need resource availability)
need to do risk management w/ reserves & CASH FLOWS (funds available when
needed)
aggregate activity costs for budget
Controlling Costs Progress report objectively, otherwise just guess (earned value management best,
or reserve analysis)
reserves only allowed if based on historical evidence
Cost Management Overview strong connection with time management, both very hard
cost = sacrifice to achieve something, MANAGEMENT = complete project in
approved budget (more expensive later)
OTHER Cost Management Vocab Value Analysis: cheaper way of doing the same work
Cost Risk
Life Cycle Costing PHASES: 1. initial costs (+ customization, integration)
2. Installation/Develop (labor deploy)
3. Operation Costs (support, subscriptions)
4. SCALING? (adding more capacity as growth continues)
5. Maintenance & Upgrades (performance tuning), AFFORD AFTER WARRANTY?
(# years out)
6. Downtime/Contingency
7. End of Life, Disposal (data migration out)
Planning Cost Management plan/manage/control costs
techniques: ROI analysis, discounted cash flow
Estimate Costs to anticipate costs vs benefits
include costs of quality efforts, risk efforts (mitigation), PM's time, activities, etc.
Types of cost direct (travel, wage, recognition), indirect (tax, benefits, janitor)
variable (wages), fixed (utilities)
Estimate cost inputs management plan, scope baseline, risk, historic examples, PM COSTS
schedule (cost timing and buying plan)
HR plan (pay)
Methods of estimating cost same as time:
one-point: historic data, expert, guess
Analogous: top-down (historic)
Parametric: relationship between variables, data, regression analysis
, Cost Management Principles tangible costs or benefits are measured in dollars (you can't with intangibles)
direct costs produce the products/services in a project, indirect costs indirectly
perform the project
sunk costs are already spent, don't effect decisions (future ONLY)
Prospect Theory Sunk costs: decision makers continue to pursue project they spent money on
(throw good money after bad)
sunk costs arise from new tech making older investments obsolete
Cost Management Terms needed for IT managers to speak the language:
LIFE CYCLE COSTING: total cost of ownership, DEVELOP + SUPPORT
CASH FLOW ANALYSIS: annual cost/benefits + annual cash flow
RESERVES: in estimate, mitigate risk by adding money for potential troubles
(contingency if planned for, management if unknown)
Learning Curve Theory when many items are produced repetitively, the unit cost decreases in a regular
pattern as more units are produced.
COCOMO Constructive Cost Model (by Barry Bohem): for software development
parameters = function points (tech independent assessments of things to develop
system)
SOLC (source of lines code) = human written code
Only PARAMETRIC MODELS NOT RISK TO HUMAN DECISIONS
Function Point Estimation Steps 1. System Size (inputs/outputs/etc. x complexity for TOTAL FUNCTION
MEASUREMENT), adjust/review, convert to CODE
2. Effort based on size and production rate of function
3. Scheduled Time
Determining Budget Cost baseline - part of budget PM can control (need resource availability)
need to do risk management w/ reserves & CASH FLOWS (funds available when
needed)
aggregate activity costs for budget
Controlling Costs Progress report objectively, otherwise just guess (earned value management best,
or reserve analysis)
reserves only allowed if based on historical evidence
