Cost Management
Cost Management is a key concept of project governance that involves estimating, budgeting, and controlling costs so the project can be completed within the approved budget. The main goal of cost management is to avoid going over budget while maintaining the quality of the project delivery. The process begins with cost estimating, followed by cost budgeting, which includes resource planning, cost estimating, budgeting, financing, funding, managing, and controlling costs. It also involves monitoring the status of the project to update budget and manage changes to the cost baseline. It is essential to manage project cost to ensure project success without exhausting resources.
Guide to Cost Management in CAPM Project Governance
Importance:
Cost Management is indispensable for any project and specifically in the context of CAPM (Certified Associate in Project Management) Project Governance. Cost Management essentially ensures that the project is completed within the approved budget. It not only prevents cost overruns, but also optimizes the use of resources, thereby delivering value for money.
What is Cost Management:
It is a method to plan, manage and control the budget of a project. It involves estimating costs, determining the budget, controlling costs, and managing changes to the budget. Its primary purpose is to complete the project within the approved budget.
How it works:
Cost Management starts with the preparation of a cost management plan during the planning phase of the project. Costs are estimated for each activity, and these estimates are rolled up to create an estimated project budget. Throughout the project, cost variances are identified, monitored and controlled to keep the project within budget.
Answering Questions on Cost Management in an Exam:
You should focus on understanding the three main processes involved i.e. cost estimating, cost budgeting, and cost control. Know the inputs, tools & techniques, and outputs for these processes. Understand key concepts like variance, earned value management, and project cost management.
Exam Tips:
Common questions may relate to formulas like CV (Cost Variance), or CPI (Cost Performance Index). Memorize these formulas and know when to use them. Real-world scenarios would be provided, and you will have to apply theoretical knowledge to these scenarios. Practice a lot to get a good grasp on the concepts and application.
Remember: Precision is key. Focus on understanding concepts and able to apply them realistically.
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