Different Types Of Cost In PMP Exam

Paul Naybour

Sunk Costs are retrospective (past) costs that have already been incurred and cannot be recovered

Committed costs are similar to sunk costs but are more often refer to contractual commitments

Accrued cost goods or services which have been completed but not invoiced or invoiced but not yet paid.

Estimate is a qualitative assessment of the cost to complete a project. It is different from a budget that has been approved. They can be preliminary, conceptual, feasibility, order of magnitude of definitive.

Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen).

Forecast is the project manager’s best estimated of the cost to complete to project.

EAC is Estimate to complete; this is the expected cost for the whole project based. Most often calculated from earned value metrics. The PM Bok recognises four way of calculating EAC

1.       Remaining work is completed at the planned rate EAC = AC + BAC –EV

2.       Remaining work is completed at the current CPI efficiency EAC = BAC / CPI

3.       EAC is a weighted forecast from CPI and SPI. EAC = AC +(BAC-EV)/ (CPI x SPI). Note different weighting can be used for CPI and SPI

4.       A bottom up EAC using the individual work package.  

ETC is the estimate to complete the remaining work.

Expected monetary value is the cost of a risk or opportunity multiplied by the likelihood to that opportunity occurring. EMV = %prob x cost impact

Actual cost is the cost of the work done to date. It included paid invoices and other cost plus and accrual.

Earned Value is the value of the work done, derived from the budget for the work multiplied by the % complete EV= BAC x %complete

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