AACE CCT flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Contingency
- Reserve within the project estimate base that covers known risks and uncertainties inside approved scope; it is drawn down as risks retire and excludes escalation and management reserve.
- Management reserve
- Funds held outside the project cost baseline for unknown-unknowns and unapproved scope changes; spending requires management authorization and it is not part of the estimate for planned work.
- Six-tenths rule
- Capacity scaling formula C2 = C1 × (Q2/Q1)^0.6 used for order-of-magnitude equipment or plant estimates; valid only over moderate capacity ranges and when the exponent is validated from actual data.
- Learning curve formula
- Unit cost model Tn = T1 × n^b where b = log(learning rate)/log 2; an 80% curve gives b ≈ −0.322 and represents improving repetitive labor productivity.
- Bottom-up estimating
- Method that builds total cost by aggregating detailed work-package estimates of quantities, hours and rates; the most accurate and most labor-intensive technique, typical of definitive estimates.
- AACE estimate class
- Rating from Class 5 (order of magnitude, 0–2% definition) to Class 1 (definitive, 65–100% definition) assigned by end usage and definition maturity, not by estimating methodology.
- Escalation
- Projected increase in price levels applied to base-date costs using cost indices; it addresses inflation, not scope uncertainty, and is kept separate from contingency.
- Parametric estimating
- Model that estimates cost from statistical relationships between historical costs and drivers such as capacity, weight or throughput; suited to early phases with limited design detail.
- Total float
- Time an activity can slip without delaying the project finish; equals LS − ES or LF − EF, and the critical path carries the least total float, normally zero.
- Free float
- Time an activity can slip without delaying any successor's early start; equals the earliest successor ES minus the activity's early finish.
- Forward pass
- CPM calculation establishing each activity's earliest start and finish, moving from project start to finish and taking the maximum predecessor early finish.
- PERT expected duration
- Three-point weighted average (O + 4M + P)/6 giving expected activity duration; the standard deviation is (P − O)/6, used for probabilistic schedule risk.
- Critical path
- Longest dependent chain through the network; it defines the shortest possible project duration and has zero, or the least, total float.
- Resource leveling
- Rescheduling within float to flatten resource demand; where float is insufficient it extends project duration and can move the critical path.
- Duration formula
- Activity duration = quantity of work ÷ (productivity per resource × number of resources); changing crew size changes the duration in this relationship.
- Schedule baseline
- Approved time-phased schedule against which progress and float consumption are measured; only formally approved changes may modify it.
- Cost Performance Index
- CPI = EV ÷ AC. Values below 1.0 mean cost overrun relative to work earned; above 1.0 means work earned cost less than budgeted.
- Schedule Performance Index
- SPI = EV ÷ PV. Values below 1.0 indicate work is behind plan; cost-based SPI converges to 1.0 at completion, so it is unreliable for forecasting.
- Estimate at completion
- Forecast of total project cost; the common formula BAC ÷ CPI assumes current cost efficiency continues, while AC plus a bottom-up ETC is used when variances are atypical.
- To-complete performance index
- TCPI = (BAC − EV) ÷ (BAC − AC); above 1.0 means the remaining work must be performed more efficiently than has been achieved to date.
- Earned value
- Budgeted cost of work performed, EV = budgeted cost × physical percent complete; combined with PV and AC it produces variances and performance indices.
- Cost variance
- CV = EV − AC. A negative result is a cost overrun; variance is stated in currency units, while CPI expresses the same relationship as a ratio.
- 50/50 earning rule
- Fixed-formula progress rule crediting 50% of an activity's budget at start and the remainder at finish; suited to short-duration tasks.
- Variance threshold
- Predefined limit that triggers investigation or a corrective action plan when cost or schedule variance exceeds it, supporting management by exception.
- Net present value
- Sum of future cash flows discounted at the required rate minus the initial investment; a positive NPV means the project adds value at that discount rate.
- Internal rate of return
- Discount rate that makes a project's NPV equal to zero; compared against the hurdle rate or cost of capital, a higher IRR is preferred.
- Payback period
- Time for cumulative cash inflows to recover the initial investment; it ignores cash flows after payback and, unless discounted, the time value of money.
- Break-even quantity
- Units needed for revenue to equal total cost: fixed costs divided by unit contribution margin, where margin is unit price minus unit variable cost.
- Markup versus margin
- Markup is a percentage of cost added to set price, while margin is a percentage of price; margin = markup ÷ (1 + markup).
- Sunk cost
- Money already spent and unrecoverable by any future action; it must be excluded when evaluating incremental cash flows between alternatives.
- Direct versus indirect cost
- Direct costs are traceable to a specific deliverable; indirect costs such as overhead and supervision are allocated across work using a defined basis.
- Benefit-cost ratio
- Present value of benefits divided by present value of costs; a ratio greater than 1.0 indicates benefits exceed costs at the chosen discount rate.