COST MANAGEMENT

Project cost management questions on the PMP certification exam do not require you to be a math whiz. The questions address cost management from a project manager's perspective, which is much more general. However, these questions are NOT easy.

Project cost management focuses on the cost of the resources needed to complete a project. The PMBOK Guide emphasizes Life Cycle Costing as a way to get a broader view of project costs. Life cycle costing includes acquisition, operation, maintenance and disposal costs. Project decisions should take into consideration life cycle costing. For example, a project manager may purchase a proprietary technology because he or she realizes, in considering life cycle costing, that the purchase will increase future maintenance support and training.

This section addresses a broad range of cost issues such as basic and capital budgeting, cost estimating, earned value, creating and interpreting S-curves and the like. This is probably the section people spend the most time studying.

In addition, performance reporting, including earned value analysis and communications are integrated into the questions on cost. Formulas you will need to know are fairly simple but you must know them. You must also understand and be able to evaluate costs using earned value formulas and variance analysis.

Cost management is a 3-step process comprised of cost estimating, cost budgeting and cost control.