Pmm190 Discussion Questions Chp8

1. Nowadays, IT professionals are much more concerned with finishing the project than dealing with its cost implications which they think are more of an accountant's work. Furthermore, IT professionals are openly accepting the fact that cost overruns are natural for a project. An overrun is an additional percentage or dollar amount by which actual costs exceed estimates. IT professionals know that IT projects are low in budget at the initial phase because project requirements are unclear. As such, cost overruns can't be avoided. However, under-emphasizing the importance of realistic project cost estimates from the outset touches only the superficial part of the problem.

2. Cost management involves the processes necessary to ensure a project team completes a project within an approved budget. Cost management principles help communicate to upper management the return on investment, net value analysis, and other financial aspects of the project in order to garner support and understanding of what is involved for the organization.

Metrics of managing costs includes profits, which are revenues after subtracting expenses, and life cycle costs, which includes total cost of ownership or development, plus project support costs. Costs or benefits are (tangible,) when they are easily measured in dollars, while (intangible) costs and benefits are difficult to quantify in monetary terms, such as goodwill, prestige, or statements of improved productivity. Direct costs are directly related to producing the products and services of the project, while indirect costs are indirectly related to performing the project, such as electricity, paper towels, or other aspects of operating a large building to provide a development workspace.

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4. The process of determining budget for a project is an activity of aggregating the cost estimates of individual activities, or a work package, to develop the total cost estimate that allows setting a formal cost baseline. This...