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Management Questions, Essay Example

Pages: 3

Words: 916

Essay

What is planned value versus earned value? What is the state of a project with an SPI of 1.02 and a CPI of .67

In Earned Value Management using the Schedule Performance Index (SPI) and the Cost Performance Index (CPI) can be useful in determining how a project is tracking to budget and schedule.  The SPI shows how the working being performed is comparing to the originally proposed schedule.  When calculating SPI, anything over 1.0 means that he project is ahead of schedule because the amount of work performed is greater than the amount estimated to be complete at this particular time.  Since the SPI is 1.02 this means the work is ahead of schedule.  The CPI demonstrates how much money the work being accomplished is worth for every dollar spent.  The CPI is .67 which means that for every dollar spent on .67 cents of work is being accomplished.  Ultimately this means that at this point in time the project is over budget.

What are the differences between fixed costs, variable costs, indirect costs and direct cost? Be sure to provide examples of each.

Fixed costs are costs associate to a project that no matter the output of the project is completely independent.  This means that no matter the amount of production on an assembly line or the changes in project scope the fixed costs remain constant.  Variable costs are directly tied to the output and vary accordingly.  Variable costs fluctuate in a generally consistent rate as output requirements change.  Direct costs are those costs associated to a product.  This being said the costs can be traced back to a particular product or good.  The direct cost is assigned to a particular activity or service.  The indirect costs are those costs that are incurred but are not easily assignable to a specific good or service.  An example of a direct cost is the amount of steel needed to create the fenders for a new vehicle on the assembly line.  This cost can be associated to that assembly and project.  On the other hand the indirect cost example would be the electricity used by one building in which two different products are being produced.  Unless the plant knows exactly which assembly line uses the power the cost would be an indirect cost to the product.

What are the primary inputs to cost estimates and budget?

The inputs to a cost estimate include all aspects of the project that would influence the overall cost of the project.  The major inputs include the overall scope of the project, project schedule, project requirements, quality parameters and other factors.  There is a triple constraint which quality, schedule and cost are always in constant flux.  The inputs to the cost estimate are determined by the schedule of the project.  This means that if the project is accelerated then the cost may increase or the quality will decrease.  Also, if the quality of meeting the requirement is high, which it generally is, the cost may increase in order to experience the quality needed.  The actual inputs into a cost estimate include the activity performed, the time-frame required and the quality of that activity.  The budget would require inputs from the cost estimate which include direct, indirect and variable costs associated with the project.

What are the differences between bottom-up estimations, analogous estimations and parametric estimations? Please include both pros and cons of each.

The difference will become apparent after the explanation of each type of estimation technique is discussed.  First is the bottom-up estimate.   This type of estimate breaks down the effort required for the project into small work packages.  These packages are then given an estimate by the people most closely involved and/or the subject matter expert.  Each work package is then brought back together with their respective assigned estimate to form the overall project estimate.  This estimate can be more accurate than other methods due to the fact that each area is broken down into a more manageable and quantifiable effort.  Also this effort is assigned to a person close in relation to the effort and thus knows how much effort it would take to perform the task.  The downside of the bottom-up method is the time required to gather all of the necessary inputs and estimates from the subject matter experts as well as defining work packages that may not be simple to deconstruct.

Analogous estimating involves utilizing the existing experience of other project managers or people that have worked on previous projects that are similar in scope and the outcome is similar to previous works completed.  The team uses prior experience to predict the estimates for the current project.  This estimation type can be conducted in a fairly expeditious manner and if the projects are actually similar in nature the outcome can be accurate.  The disadvantage would be if the project team does not have a comparable project to use.  Parametric modeling can be very accurate when estimating project effort.  The modeling is done by developing a formula that estimates the time or amount of resources for a specific function of the project.  This is similar to the analogous method as it requires input from previous projects to develop the answer to the amount of resources required.  The parametric modeling uses the prior project to develop the right formula for calculation.  This method would be quick and accurate but if the model has not been developed it cannot be used for the project.  This also requires a large base of expertise and project management experience.

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