Deck 4: Budgeting the Project

Question 1

The project manager recognizes an expense when an invoice is actually paid.

Answer 1

False

Question 2

A budget is a plan for allocating resources.

Answer 2

True

Question 3

Traditional organizational budgets are task-oriented,rather than activity-oriented.

Answer 3

False

Question 4

Learning curve theory states that performance of labor per unit will improve by a percentage each time production increases by the same percentage.

Question 5

Budget cuts are usually disastrous to an exponential life-cycle project.

Question 6

By very careful planning,a project manager can do away with cost uncertainty.

Question 7

Most organizations use top-down budgeting.

Question 8

Calculating the Tracking Signal can not only reveal if estimates are biased,it can also tell how severe the bias is.

Question 9

Budgeting a project is often more difficult than budgeting routine activities.

Question 10

A budget is a plan for allocating resources to project activities.

Question 11

A key advantage of top-down budgeting is that the overall budget costs can be estimated quite accurately.

Question 12

Overhead and indirect charges should NOT be assigned to a project.

Question 13

Activity budgets show expenses by task and expected time period of the expenditure.

Question 14

Individual elements of project budgets are generally more accurate in bottom-up budgeting.

Question 15

The project's budget is merely the sum of its resource costs.

Question 16

Learning curve theory states that performance of labor per unit will improve by a fixed percentage each time production doubles.

Question 17

Because project budgeting is for a special case and the organization's budgeting process is for routine work,the project manager need NOT be familiar with the organization's accounting system.

Question 18

Expected value is a tool for risk analysis.

Question 19

There is no way other than guessing to estimate the impact of learning on a project's task.

Question 20

The project budget acts as a project control.

Question 21

A requirement of top-down budgeting is:

A) involvement of the project team
B) estimating the detailed level of the project's tasks
C) applying the learning curve to labor time estimates
D) all of the above
E) none of the above

Question 22

Organizational tradition has little or no impact on the firm's project budgeting.

Question 23

Which of the following statements is NOT true about a firm and its project accounting?

A) each firm has its own rules with regard to the allocation of overhead
B) most firms must comply with the Sarbane-Oxley Act
C) the project manager must rely on the accounting department to make special allowances for his/her project
D) most firms have their own accounting idiosyncrasies
E) unexpected charges may suddenly appear when the PM least expects it

Question 24

The first unit requires 10 hours to complete.If the industry uses an 80 percent learning rate,how long should the third unit take?

A) 10 hours
B) 9 hours
C) 8 hours
D) 7.02 hours
E) 6.40 hours

Question 25

The first unit required 6 hours.If the industry uses a 90 percent learning rate,how long should the fourth unit take?

A) 6 hours
B) 4.86 hours
C) 3.75 hours
D) 3.34 hours
E) 2.67 hours

Question 26

Organizations can use both top-down and bottom-up budgeting.

Question 27

The budgeting approach based on the collective judgments of top and middle managers is called:

A) top-down budgeting
B) bottom-up budgeting
C) activity budgeting
D) program budgeting
E) life cycle budgeting

Question 28

Contingency planning is generally begun at that point in time when an organization finds itself in serious financial trouble.

Question 29

Why is it necessary to consider the learning curve of resources on a project?

A) to estimate labor costs properly
B) to improve project team morale
C) because it always takes less time to do a task after someone has done it a few times
D) collective bargaining contracts require it
E) All of the above

Question 30

Learning curves can be used to help improve cost estimates.

Question 31

The result of game theory analysis is a Risk Priority Number.

Question 32

For projects with S-shaped life cycles,top-down budgeting is most likely unacceptable.

Question 33

Top-down budgeting typically results in better acceptance of the budget.

Question 34

Random errors will tend to cancel out.

Question 35

With top-down budgeting,overlooking a small but important task can often cause a serious budgetary problem.

Question 36

The name given to the budget process that aggregates income and expenditures across projects is:

A) activity-oriented budget
B) top-down budget
C) bottom-up budget
D) program-oriented budget
E) activity-based costing

Question 37

FMEA stands for

A) Financial Methods and Efficiency Analysis
B) Failure Modes and Effect Analysis
C) Full Monetary Expenditure Accrual
D) Financial Measurement of Expenses Accrued
E) Factor Mode and Efficiency Analysis

Question 38

Mechanical tasks typically have higher learning rates than more mental tasks.

Question 39

A problem with bottom-up budgeting is:

A) individual team members overstate their budget needs
B) lack of involvement from the project team
C) underestimating the project task's budget requirements
D) all of the above
E) none of the above

Question 40

Bottom-up budgets are usually more accurate in the detailed tasks.

Question 41

Which of the following is NOT true regarding top-down budgeting?

A) It is based on the collective judgments of top and middle managers.
B) Overall project costs are estimated by top and middle managers and then passed on to the next lower level.
C) The overall budget cost is generally not very accurate.
D) Overlooking small but important tasks can lead to a serious budgetary problem.
E) All of the above are true concerning top-down budgeting.

Question 42

Which of the following is NOT true regarding bottom-up budgeting?

A) The method tends to be inaccurate in the detailed tasks.
B) The WBS is used to identify the elemental tasks.
C) It is rarely used.
D) It is a good managerial training technique.
E) All of the above are true concerning top-down budgeting.

Question 43

There is a 30 percent chance that a new product development project will result in sales of $500,000 and a 70 percent chance that the project will result in sales of $100,000.What is the expected value of this project?

A) $220,000
B) $240,000
C) $300,000
D) $320,000
E) $340,000

Question 44

Which of the following is most closely associated with FMEA?

A) risk priority number
B) game theory
C) expected value
D) simulation
E) program budgeting

Question 45

Which of the following is NOT a sub-process associated with risk management?

A) risk identification
B) risk measurement
C) qualitative risk analysis
D) quantitative risk analysis
E) risk response planning

Question 46

A task is expected to take 20 hours of labor at $25 per hour.The required material cost is $500 and the organization charges 30% of direct labor for overhead.The total task cost is:

A) $500
B) $1,150
C) $1,250
D) $1,300
E) $1,500