Questions

Module 6 – Project Cost Management

Discussion Questions

1. Discuss why many IT professionals may overlook project cost management and how this might affect the ability to complete projects within budget.

Information technology projects have a poor track record in meeting budget goals. There is an average cost overrun for unsuccessful IT projects ranging from 180 to 56%. There is room for improvement in meeting cost goals for IT projects.

2. Explain some of the basic principles of cost management, such as profits, life cycle costs, tangible and intangible costs and benefits, direct and indirect costs, and reserves.

Profits are revenues minus expenditures. To increase profits, a company can increase revenues, decrease expenses, or try to do both .life cycle costing allows you to see big pictures view os the cost of the project throughout its life cycle.This helps you develop an accurate projection of a project’s financial cost and benefits. Tangible costs or benefits are those costs or benefits that an organization can easily measure in dollars. Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms. Direct costs are costs that can be directly related to producing the products and services of the project. Indirect cost are costs that are not directly related to the products or services of the projects, but are indirectly related to performing the project.

3. What is meant by a sunk cost? Give examples of typical sunk costs for an IT project as well as examples from your personal life. Why is it difficult for people to ignore them when they should?

4. Give examples of when you would prepare rough order of magnitude (ROM), budgetary, and definitive cost estimates for an IT project. Give an example of how you would use each of the following techniques for creating a cost estimate: analogous, parametric, and bottom-up.

5. Explain what happens during the process to...