PMI Scheduling Professional Certification (PMI-SP) Practice Exam

In cost management, which type of estimating involves detailed bottom-up analysis?

1. Analogous estimating

2. Top-down estimating

3. Parametric estimating

4. Bottom-up estimating

The correct answer is: Bottom-up estimating

Bottom-up estimating is a method that involves a detailed analysis of project components by estimating the costs of individual tasks or activities first, then aggregating these estimates to arrive at an overall project cost. This approach is particularly beneficial because it allows for a more accurate and comprehensive understanding of project expenditures, as each element is scrutinized and evaluated based on its specific requirements. In this method, project managers break down the work into smaller segments (often referred to as work packages) and assess the costs associated with each segment including materials, labor, and overhead. Since this approach is thorough and takes into account the unique aspects of each task, it often yields more reliable estimates pertaining to project costs. While other estimating techniques, such as analogous or top-down estimating, rely on high-level data, historical information, or overall project parameters, they may lack the same level of detail that bottom-up estimating provides. Consequently, bottom-up estimating is favored when detailed and accurate cost projections are necessary, particularly in large or complex projects where even small cost variations can significantly impact the overall budget.