Deck 9: Cost Estimating and Budgeting

Question 1

The major problem with using traditional budgets for projects is that they:

A) are annual in nature
B) are usually divided into functional areas
C) focus on project objectives
D) all of the above
E) a and b only

Answer 1

a and b only

Question 2

If the target cost is $235,000, which of the following is the most precise estimate:

A) $236,000
B) £237,342
C) $233,500

Answer 2

£237,342

Question 3

If the actual cost turns to be $234,000, which of the following is the most accurate estimate:

A) $236,000
B) $237,342
C) $233,500

Answer 3

$233,500

Question 4

Which method relies on formulae and tables to estimate project costs (circle on):

A) expert opinion
B) analogy
C) parametric
D) cost engineering

Question 5

Which method provides the least accuracy when estimating total project cost (circle on):

A) expert opinion
B) analogy
C) parametric
D) cost engineering

Question 6

The estimate providing the best accuracy for total project cost comes from (circle one):

A) looking at the project as a whole
B) combining estimates from all the work packages
C) looking at the cost of similar, completed projects
D) the cost constraint specified by the customer.

Question 7

A contingency amount can be (circle one):

A) applied to individual activities or work packages
B) applied to the project as a whole
C) continually increased to cover cost escalation
D) all of the above
E) a and b only.

Question 8

Which of the following are potential ways to reduce cost escalation (circle all that apply):

A) using a fixed price contract
B) making estimates by people who tend to be optimistic
C) making final cost estimates at the earliest possible date in the planning process
D) monitoring and controlling project costs and activities

Question 9

The project planning and estimating process (circle all that apply):

A) uses a top-down approach to disseminate information about project goals to lower levels
B) uses a bottom up approach to prepare and check labor and cost estimates
C) employs pricing units to decide on areas of work needed and to prepare labor hour estimates
D) relies upon work package supervisors to authorize when work packages should begin

Question 10

Life cycle costs (circle all that are true):

A) are used by designers and engineers to make key design and procurement decisions
B) include the cost to develop and build a system
C) account for the operation and maintenance of the end item system
D) are sometimes used to establish target costs on the project or system

Question 11

Which of the following statements are true about cost estimating (circle all that are true):

A) the expert opinion method is the same as the cost engineering method
B) the analogy method requires that a similar project or work task was done previously
C) the parametric method is an estimate based on a mathematical formula
D) the analogy method can take into account differences between projects

Question 12

Statement: Cost escalation always results in the contractor charging the customer more than the original contract specified.

Question 13

Statement: Generally the amount needed in the management reserve should decrease as the project progress.

Question 14

Statement: If a cost estimate comes up too high, a good way to reduce it is to uniformly cut costs by a certain percentage for everything on the project.

Question 15

Statement: When we speak of recurring costs, we usually associate these costs with one-of-kind or first-of-a-kind items.

Question 16

Statement: Life cycle costs are the same as project costs.

Question 17

Statement: Life cycle costs are estimated at the end of the project.

Question 18

Statement: Life cycle costs are mostly determined by the project manager by and senior managers

Question 19

Statement: The project cost estimate is derived from the project target cost.

Question 20

Statement: In general, high precision in an estimate is more important than high accuracy.

Question 21

Statement: A time-phased budget shows project costs budgeted over time according to project schedules.

Question 22

Statement: The feasible budget region is developed by looking at the difference between the project cost profile using early start times and the profile using late start times.

Question 23

Statement: The net present worth of the project derived from project expenses can be increased by delaying the start of project activities.

Question 24

Statement: Working capital represents the difference between expenditures the contractor must meet and payments the contractor receives from the client during the course of the project.

Question 25

Statement: The process of breaking the project into work packages through the WBS has no relevancy to cost estimating.

Question 26

Statement: The parametric method of cost estimating can be combined with the analogy method.

Question 27

Statement: The top-down approach to cost estimating provides greater cost accuracy than the bottom-up approach.

Question 28

Statement: Life cycle costs refer exclusively to the costs of operating a systems after it has been installed.

Question 29

Statement: The majority of a system's life cycle costs are determined by decisions made in the conceptual and early design stages.