Deck 15: Toolkit C: Financial Analysis Tools

Question 1

Which of the following is an example of indirect costs?

A)Project team members' salaries
B)Hardware purchases used only for new systems
C)Consumable supplies costs
D)Insurance expenses

Answer 1

D

Question 2

Identify an example of direct costs.

A)Project team members' salaries
B)Power consumption costs
C)Copy machine rentals
D)Insurance expenses

Answer 2

A

Question 3

Intangible costs are costs that can be assigned a specific dollar value.

Answer 3

False

Question 4

Operational costs are incurred only once at the time a system is developed or acquired.

Question 5

Variable costs are costs that vary depending on the level of activity.

Question 6

Which of the following is an example of operational costs?

A)Project team members' salaries
B)Software purchases
C)Initial user training costs
D)System maintenance evaluations

Question 7

The cost of customer dissatisfaction, lower employee morale, and reduced information availability are examples of _____.

A)tangible costs
B)intangible costs
C)fixed costs
D)variable costs

Question 8

Identify an example of developmental costs.

A)Ongoing training costs
B)Software purchases
C)System maintenance evaluations
D)Annual software license fees

Question 9

Return on investment (ROI) is calculated using the formula _____.

A)ROI = (total benefits - total costs) / total costs
B)ROI = (total costs - total benefits) / total costs
C)ROI = (total benefits - total costs) / total benefits
D)ROI = (total costs - total benefits) / total benefits

Question 10

Which of the following is an example of variable costs?

A)Project team members' salaries
B)Printer paper costs
C)Hardware rental charges
D)Property taxes

Question 11

Developmental costs are incurred after a system is implemented and continue while the system is in use.

Question 12

Indirect costs, or overhead expenses, cannot be attributed to the development of a particular information system.

Question 13

Tangible costs are costs whose dollar value cannot be calculated easily.

Question 14

_____ means that the projected benefits of a proposed system outweigh the estimated costs.

A)Operational feasibility
B)Technical feasibility
C)Economic feasibility
D)Schedule feasibility

Question 15

Direct costs are costs that can be associated with the development of a specific system.

Question 16

Direct costs usually are more difficult to identify and predict than indirect costs.

Question 17

_____ is performed to determine the economic feasibility of an information system project and to compare alternative solutions.

A)SWOT-check analysis
B)Economical detriment analysis
C)Contrast analysis
D)Cost-benefit analysis

Question 18

Identify an example of fixed costs.

A)Consumable supplies costs
B)Printer paper costs
C)Hardware rental charges
D)Telephone charges

Question 19

Positive benefits increase revenues, improve services, or otherwise contribute to an organization as a direct result of a new information system.

Question 20

Fixed costs are costs that are relatively constant and do not depend on a level of activity or effort.

Question 21

Return on investment analysis considers costs and benefits over a shorter time span than payback analysis.

Question 22

Critics of return on investment analysis raised a point that the return on investment (ROI) technique does not recognize the timing of costs and timing benefits.

Question 23

When comparing the net present values of projects, all things being equal, the project with the lowest net present value is the best investment.

Question 24

When IT department costs are not charged to other departments, the information systems department is called a(n) _________ because it generates accounting charges with no offsetting credits for IT services.

Question 25

Critics of return on investment analysis raised a point that return on investment (ROI) measures the overall rate of return for a total period and annual return rates vary considerably.

Question 26

A(n) _________ is a technique that uses accounting entries to allocate the indirect costs of running an IT department.

Question 27

In a fixed charge method, the IT group is regarded as a(n) _________, which is a department that is expected to break even or show a profit.

Question 28

Cost-avoidance benefits refer to expenses that are necessary if a new system is not installed.

Question 29

_________ is the process of comparing the anticipated costs of an information system to the anticipated benefits.

Question 30

_________ is the total time that a user is connected actively to a remote server - some Internet service providers use this as a basis for charges.

Question 31

_________ is the charging of indirect IT department costs based on the resources used by an information system.

Question 32

In present value analysis, most companies require a rate of return that is higher than the discount rate because of the degree of risk in any project compared with investing in a bond.

Question 33

The time taken by payback analysis to recover an information system's costs is called the _________.

Question 34

_________ is the process of determining how long it takes an information system to pay for itself.

Question 35

In a client/server system, _________ is the time that the server actually responds to client requests for processing.

Question 36

When conducting a payback analysis, the time it takes for the accumulated benefits of an information system to equal the accumulated costs of developing and operating the system is calculated.

Question 37

Some managers are critical of payback analysis because it places all the emphasis on early costs and benefits and ignores the benefits received after the payback period.

Question 38

When determining economic feasibility, a systems analyst must consider a project's benefits compared to the project's _________, which includes ongoing support and maintenance costs as well as acquisition costs.

Question 39

Unlike payback analysis, present value analysis considers only the earlier values and not all the costs and benefits.

Question 40

Payback analysis, in spreadsheets, requires a formula to display cumulative totals, year by year.

Question 41

_________ is a percentage rate that measures profitability by comparing the total net benefits received from a project to the total costs of the project.

Question 42

To help system analysts perform present value analysis, adjustment factors for various interest rates and numbers of years are calculated and printed in tables called _________.

Question 43

The _________ of a project is the total present value of the benefits minus the total present value of the costs.

Question 44

The period between the beginning of systems operation and the point when operational costs are rapidly increasing is called the _________ of the system.

Question 45

The _________ of a future dollar is the amount of money that, when invested today at a specified interest rate, grows to exactly one dollar at a certain point in the future.