PMI PMP Project Management

Category - Cost Management

Tim just finished a project at Wired4Less. His project came in $10,000 under budget, but then it’s determined that maintenance needs to be done on the application which will cost the firm $45,000 more next year. What concept does this issue best exemplify?
  1. Value analysis
  2. Life cycle costing
  3. Bottom-up estimating
  4. Excellent leadership
  5. None of the above
Explanation
Answer: b - This is best represented by life cycle costing, which looks at a project’s total cost over its lifecycle, instead of job cost through deployment only. Value analysis looks at ways to do the same work for less. Bottom-up estimating brings together all of a project’s incremental estimates and summarizes them into one large estimate.

Key Takeaway: A project manager who can properly articulate life cycle costing is worth his or her weight in gold, and improved future stock price performance. Poor quality increases down the line costs, increasing life cycle cost.
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