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Tracking Actual Cost

5 minutes 5 Questions

Another essential concept in Agile EVM is tracking the Actual cost. The Actual Cost is the true cost incurred for the work performed. All expenses related to a project, including labour cost, materials cost, and any additional costs, are tracked. Agile EVM uses this tracking to provide an accurate reflection of how the project is faring financially, allowing project managers to make informed decisions based on actual expenditures.

Guide to Tracking Actual Cost in PMI-ACP Agile EVM

Tracking actual cost is an integral part of Agile Earned Value Management(EVM). The actual cost refers to the total costs actually incurred and recorded in achieving the work performed during a given time period.
Importance: Tracking actual cost is crucial as it provides a factual basis for future project cost forecasts, aids in determining variance from the budget, and facilitates more accurate project cost management. It also enhances project cost control and allows for better resource allocation.
How it Works: The process measures the total cost of all resources used to accomplish the work performed in a given period. This includes direct and indirect costs such as labor, materials, and overhead.
Answering Exam Questions: When answering questions about tracking actual cost, it is essential to remember to include all incurred costs. Ensure to note any variances in the budget. Awareness with the PMI-ACP agile principles related to Agile EVM helps in correctly deducing the necessary data.
Exam Tips: Understanding the difference between estimated and actual cost is crucial. Practice extracting actual cost data from complex scenarios and remember the formulas on calculating actual cost and determine its implications.

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PMI-ACP - Agile EVM (Earned Value Management) Example Questions

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Question 1

You are managing a manufacturing project, after the project half-way mark you notice the actual cost exceeds the estimated cost. As an Agile Practitioner how will you deal this?

Correct Answer: Analyze the reasons for the increased actual cost and adjust the budget if necessary.

As an Agile Practitioner, when actual cost exceeds the estimated cost, the best course of action would be to analyze the reasons for the increased actual cost and adjust the budget if necessary. This gives an opportunity to understand what is driving the cost up and allows informed decisions to be made to control it. The second answer, using contingency funds without any root cause analysis, is not advisable because it does not address the cause of the issue and could potentially lead to the same problem repeating in the future. The third answer, to continue the project with the hope that the costs will eventually balance out on their own, is also not recommended because it's a passive approach towards a serious issue that requires active involvement to resolve. The fourth answer, to reduce the project scope to cut down costs, might be considered as a last resort, but before making such a critical decision, a thorough understanding of why the costs have increased is essential.

Question 2

In a small software development project, you are overseeing the progress. You had originally estimated $10,000 for a certain part of the project, but it was completed in $8000. What action would you take?

Correct Answer: Update the project budget to reflect the actual cost.

In a software development project, actual expenses are often different from the estimated costs. In this case, the part of the project was completed at a lower cost than estimated. The most appropriate action is to 'Update the project budget to reflect the actual cost.' This ensures that the project budget is accurate and transparent, helping in better monitoring and effective financial decision making. The option 'Ignore the difference as it is a saving' is not recommended, as it does not reflect reality in the project's financial status. 'Allocate the saved money to other more costly parts of the project' suggests directly using the savings elsewhere, which is not appropriate without revising the budget. 'Inform the team about the savings to boost their morale' could be a positive move, but it is not the primary action one should take in such a situation. Remember, financial transparency is critical in project management.

Question 3

In a project to design a mobile application, you have calculated the Actual Cost (AC) to be significantly less than the Planned Value (PV). As an Agile Practitioner, what is the most appropriate way to interpret this information?

Correct Answer: The project is under budget.

When the Actual Cost (AC) is significantly less than the Planned Value (PV), it means that you're not spending as much as anticipated in your plan. This implies that the project is under budget, which is the correct interpretation in this context. The answer 'The project is over budget.' is incorrect because an over-budget status would be indicated by an actual cost greater than the planned value. The answer 'The project is behind schedule.' is also incorrect because cost performance does not directly indicate schedule performance. Lastly, 'The project team is not performance excellently.' is also off the mark as the cost performance in question gives no direct indication of the team's performance efficiency.

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