Deck 7: Budgeting and Risk Management

Question 1

If a project budget is underfunded,it will often __________.

A)stimulate increased performance
B)improve utilization of resources
C)frustrate committed stakeholders
D)reduce costs

Answer 1

C

Question 2

A budget strategy that is based on collecting the judgments and experiences of top and middle managers is referred to as the __________ approach or method.

A)parametric estimating
B)statistical equivalence
C)bottom-up estimating
D)top-down estimating

Answer 2

D

Question 3

Unless the project manager is familiar with the firm's __________ it will be very difficult to exercise budget control.

A)accounting system
B)budget plans
C)marketing procedures
D)cost accounting

Answer 3

A

Question 4

You have been asked to estimate the costs for a project to build an industrial power plant.Based on historical data,the steam turbine accounts for 30 percent of the total costs for the plant.If the steam turbine costs $300,000,the expected top-down estimated cost for this project would be __________.

A)$10,000
B)$100,000
C)$900,000
D)$1,000,000

Question 5

Many lower-level managers often treat the entire budgeting process as if it were a __________,a situation in which any individual's gain is another individual's loss.This can make competition among junior managers quite intense.

A)zero-sum game
B)pie-chart dilemma
C)Brooks' Law result
D)Top-down approach

Question 6

If a project budget is over funded,it will often __________.

A)produce waste
B)encourage slack management
C)improve morale
D)produce waste and encourage slack management

Question 7

The advantage of the______ process is that it is generally associated with participative management.

A)bottom-up
B)top-down
C)Murphy's
D)Efficient

Question 8

In order to develop a budget,the project manager must forecast __________.

A)the resources required
B)when resources will be needed
C)the cost of resources
D)All of the above

Question 9

The Pathfinder Mission was to go where?

A)The moon
B)Mars
C)Saturn
D)Venus

Question 10

The __________ form of budgeting has the advantage of using individuals closer to the work to provide estimates of resource requirements.

A)top-down budgeting
B)work element costing
C)bottom-up budgeting
D)iterative budgeting

Question 11

Identify the statement that is not correct regarding a project budget.

A)The budget is included in a project plan.
B)The budget is not an expression of organizational policy.
C)The budget serves as a control mechanism for the project.
D)The budget serves as a standard for comparison of planned and actual usage of resources.

Question 12

A work element whose cost is fully developed would __________.

A)exclude the cost of labor and resources
B)include only the profit and direct costs
C)exclude the cost of special machinery and overheads
D)include direct costs plus overhead and G&A charges

Question 13

The project's budget should __________.

A)associate resource use with the achievement of organizational goals
B)allow funds to be spent without linkage to achievement
C)not reflect the timing of expenses associated with the use of resources
D)never be changed during project execution

Question 14

__________ is a plan for allocating resources.The allocation of resources indicates the degree to which different activities of an organization are supported fully.

A)A budget
B)Direct cost
C)A management plan
D)An allocation effort

Question 15

A work element in the project plan requires 50 hours of labor each by four carpenters.The carpenters are paid $15 per hour and incur an overhead rate equal to 80 percent of their direct labor charges.Based on this data,the appropriate total cost is __________.

A)$2,400
B)$3,000
C)$4,600
D)$5,400

Question 16

The pattern of constraints in a budget embodies organizational __________.

A)policy
B)effort
C)human resource management
E)risk management

Question 17

The __________ charge is composed of the costs of senior management,the various data functions,and any other expenses not included in overhead.Often,these charges are a fixed percentage of either the direct costs or the total of all direct and indirect costs.

A)salary
B)project management
C)ethical
D)G&A

Question 18

__________ relies on well-known statistical correlations between various factors such as the total cost of a house relative to the square feet of living area.

A)Parametric estimating
B)Statistical equivalence
C)Bottom-up estimating
D)Top-down estimating

Question 19

____ are where the defined responses to the risks are detailed,but their amounts are not yet precisely known.

A)Known unknowns
B)Unknown knowns
C)Known knowns
D)Unknown unknowns

Question 20

Unknown unknowns are not part of the baseline budget and are referred to as what?

A)management reserves
B)contingency reserves
C)PMBOK reserves
D)Buffered reserves

Question 21

__________ states that adding manpower to a late software project makes it later.

A)Brooks' Law
B)Murphy's Law
C)Smith's Law
D)The Rule of Thumb

Question 22

When a firm has professional cost estimators,what is their main responsibility?

A)Coordinate with the client to develop an acceptable cost estimate
B)Work with senior management to keep costs in line
C)Develop costs that maximize profits
D)Reduce the level of uncertainty in cost estimates

Question 23

The budget process generally begins when the top management invites each division to submit a__________ for the upcoming year.

A)budget request
B)predictive budget
C)budget estimate
D)predictive request

Question 24

Each time the output doubles,the worker hours per unit decrease to a fixed percentage of their previous value.That percentage is called the __________ rate.

A)inflation
B)hurdle
C)interest
D)learning

Question 25

The traditional organizational budget is __________.

A)category-oriented
B)project-oriented
C)program-oriented
D)project-oriented or program-oriented

Question 26

Suppose that a person requires 60 minutes to complete a work element on the first attempt.On the second attempt,the work element is completed in 48 minutes.The learning rate for this person is __________% for this work element.

A)60
B)70
C)80
D)120

Question 27

Suppose that a person requires eight hours to complete a work element on the first attempt.That person has a learning rate of 90 percent for this work element.This person should require __________ hours to complete this work element on the fourth attempt.

A)5)83
B)6)48
C)7)2
D)8)8

Question 28

A work element in the project plan requires 50 hours of labor each by four carpenters.The carpenters are paid $15 per hour and incur an overhead rate equal to 80 percent of their direct labor charges.The total cost would be __________ if the carpenters consume 10 percent of the workday performing personal activities.

A)$4,860
B)$5,000
C)$5,360
D)$5,940

Question 29

______________ issues are present when bidders "low ball" a bid or when some bidders get a "last look."

A)Ethical
B)Strategic
C)Efficient
D)Effective

Question 30

A project manager must ______ as a type of risk response planning in order to soften the danger of a threat by reducing the likelihood that it will occur or by reducing its impact if it does occur.

A)avoid
B)transfer
C)accept
D)mitigate

Question 31

Which of the following is not a type of quantitative risk analysis?

A)FMEA
B)decision tree analysis
C)Monte Carlo simulation
D)expert judgment

Question 32

Several issues face firms preparing bid proposals,particularly firms in the aerospace,construction,defense,and consulting industries.Which of the following is not one of those issues?

A)How should the proposal-preparation process be organized and staffed?
B)How much should be spent on preparing proposals for bids?
C)Is it ethical?
D)How long will the project take?

Question 33

__________ budgeting allows income and expenditures to be aggregated across projects.

A)Category-oriented
B)Activity-oriented
C)Project-oriented
D)Expense-oriented

Question 34

If projects include repetitive tasks with significant human input,the __________ rate should be factored into the cost estimate.

A)inflation
B)hurdle
C)interest
D)learning

Question 35

The allowance for contingencies is usually in what range?

A)One to five percent
B)Five to ten percent
C)Six to nine percent
D)Seven to eleven percent

Question 36

Overhead costs are all of the following except which one?

A)Generally within the project manager's control
B)Arbitrary
C)Source of annoyance and frustration
D)A amount that is unique to the firm

Question 37

Given a project salary cost of $400,000 per year and forecasted wage increases of 5 percent per year,calculate the non-discounted total salary cost over a three-year project lifecycle.

A)$61,000
B)$1,200,000
C)$1,240,000
D)$1,261,000

Question 38

Which of the following is not one of the risk management subprocesses?

A)risk identification
B)qualitative risk analysis
C)work breakdown schedule
D)risk response planning

Question 39

Which cost should the project manager completely ignore in managing a project?

A)Labor
B)Material
C)Overhead and G&A
D)Project manager should not ignore any costs

Question 40

In risk response planning,where the goal of the project manager is to increase the probability that the opportunity will occur,the project manager must __________

A)exploit
B)share
C)enhance
D)accept

Question 41

__________ budgeting aggregates income and expenditures by project or program,often in addition to aggregation by organizational unit or activity.

A)Activity based
B)Capital
C)Operational
D)Project

Question 42

Kaplan et al.(2012)identified three types of risk that must be faced.List and describe each one.

Question 43

Briefly describe the seven processes for risk management.

Question 44

The determination of costs for a new process should utilize a __________,or operations sequence sheet,which describes the operation in which the new process would be used.

A)route sheet
B)budget sheet
C)cost estimation fld)owchart

Question 45

Suggest some reasons why an organization would support projects that show a significant incremental profit over direct costs but are not profitable when costs fully accounted for.

Question 46

Identify some of the common problems faced by the project budgeter.

Question 47

__________ costs vary with output.

A)General and administrative
B)Overhead
C)Direct
D)Indirect

Question 48

Describe the bottom-up budgeting process.

Question 49

Explain why senior managers view the bottom-up budgeting process as being risky.

Question 50

___________ costs are not associated with any specific product or class of products and are typically charged as a fixed percentage of some direct cost.

A)General and administrative
B)Overhead
C)Direct
D)Indirect

Question 51

An easy method of evaluating risk in certain situations by modifying project parameters and evaluating the corresponding changes is __________.

A)Monte Carlo simulations
B)risk mitigation
C)project budgeting
D)risk analysis

Question 52

Describe the top-down budgeting process.

Question 53

According to the authors,the task of risk identification will be horrendous if the risk management system has no memory.Discuss the important elements of a risk management system that would compensate for a lack of memory by the organization.

Question 54

Suggest some reasons why the authors insist that the project manager must be familiar with the organization's accounting system.

Question 55

The pattern of deviations in cost and usage used for exception reporting to management is called __________.

A)simulations
B)assumptions
C)variances
D)summaries