Deck 9: Budgeting Projects

Question 1

Regardless of what method is used to estimate project costs,supporting detail should be provided.

Answer 1

True

Question 2

Generally,parametric estimating requires less information and time than analogous estimating.

Answer 2

False

Question 3

Inflating the value of future revenue and cost streams to account for the time value of money enables better project decisions.

Answer 3

False

Question 4

Recurring costs tend to occur during project planning and closing while nonrecurring costs tend to occur during project execution.

Question 5

Most projects will employ bottom-up estimating at some point to serve as a basis for estimating cash flow needs and for controlling the project.

Question 6

Special cause variation arises when something out of the ordinary occurs.

Question 7

The component of the project management plan that describes how costs will be planned,structured and controlled is called the project financial plan.

Question 8

Plan cost management is the process that establishes the policies,procedures and documentation for planning,managing,expending,and controlling project costs.

Question 9

Early in a project when very little detail is known about a project,it is impractical to render even a rough estimate of the final project cost.

Question 10

Typically,expedited costs are preferred over regular costs.

Question 11

Estimate cost is the process of developing an approximation of the monetary resources needed to complete project activities.

Question 12

Cost estimating is linked very closely with scope,schedule and resource planning.

Question 13

Decisions related to fixed and variable costs are very sensitive to changes in volume related factors and project scope.

Question 14

On small projects,the cost management plan may simply address the accuracy of estimating,the source of funding and cost reporting procedures.

Question 15

Direct costs typically include the cost of direct labor as well as other direct costs for items such as material,travel,subcontracts and computer time.

Question 16

Analogous estimating is the most detailed,time consuming and accurate way to estimate.

Question 17

Both normal and special cause variation add to project cost and need to be considered by project managers.

Question 18

Project managers should not lie to themselves or others regarding project costs.

Question 19

Fixed costs remain the same regardless of the size or volume of work,while variable costs vary directly with volume of use.

Question 20

A contingency reserve is an amount of the project budget withheld for management control purposes,for unforeseen work that is within the scope.

Question 21

What type of cost is incurred when a project must be conducted faster than normal,and overtime for workers and / or extra charges for rapid delivery from suppliers are necessary?

A) marginal costs
B) expedited costs
C) nonrecurring costs
D) variable costs.

Question 22

All of the following items describe an aspect of life cycle costing EXCEPT:

A) Life cycle cost includes the cost of creating the project and using the result.
B) Many project selection decisions are made based upon life cycle cost.
C) Life cycle cost only includes the project cost from initiating through closing
D) Project managers may need to consider product disposition costs to calculate total life cycle cost.

Question 23

Vendor bid analysis is used to determine whether the price being asked by the vendors appears to be reasonable.

Question 24

Which of the following terms best describes a provision in the project management plan to mitigate cost and / or schedule risk?

A) reserve
B) insurance
C) padding
D) discretionary fund

Question 25

Activity based costing allocates indirect costs to fixed costs based on different types of cost drivers.Which of the following is one of the cost drivers that serve as a basis of cost allocation?

A) number of units produced
B) number of labor hours
C) quantity of materials used
D) direct equipment costs

Question 26

Projects often include indirect costs that are not associated directly with one specific project.Which of the following items are most typically considered to be indirect costs?

A) costs associated with material and purchased parts
B) the cost of labor provided by project team members,consultants and subcontractors
C) executive salaries,utilities and insurance
D) travel cost for the project team

Question 27

There are many causes of variation in project costs.Which of the following accurately describes the nature of this variation?

A) Variation is generally greater on projects that use well-known technology and an experienced project team.
B) Variation occurs in all work processes and the novelty associated with most projects creates many opportunities for variation.
C) Special cause variation comes from many small causes that are inherent in a work process.
D) Special cause variation is when something ordinary occurs

Question 28

All of the following factors must be in place in order to develop an analogous estimate effectively EXCEPT:

A) An organization must know details behind the time value of money.
B) An organization must know how the proposed project differs from the previous project.
C) An organization must have experience in performing similar projects.
D) An organization must know how much previous projects actually cost.

Question 29

The process of developing an approximation of the cost of the monetary resources needed to complete project activities is known as:

A) capital budgeting.
B) estimate resources.
C) estimate cost.
D) activity resourcing.

Question 30

In addition to optimizing project life cycle costs,value engineering can also be used to improve quality or expand market share.

Question 31

Which estimating technique uses historical data from a similar project as a starting point for creating a time or cost estimate?

A) analogous estimating
B) parametric estimating
C) bottom-up estimating
D) Monte Carlo estimating

Question 32

The documentation of a project cost estimate generally requires substantial supporting detail to include all of these EXCEPT:

A) a description of scope.
B) management reserve needs
C) the estimating methods and a range of possible outcomes.
D) assumptions and constraints.

Question 33

All of the following are among the benefits realized as a consequence of developing a cost management plan EXCEPT:

A) It shows how to develop and share relevant,accurate and timely information that stakeholders can use to make intelligent and ethical decisions.
B) It documents how the business case should be created
C) It helps stakeholders to focus on schedule and performance as well as cost.
D) It provides feedback that shows how the project's success is related to business objectives.

Question 34

Costs that repeat as project work continues such as writing code are appropriately classified as:

A) fixed costs.
B) indirect costs.
C) nonrecurring costs.
D) recurring costs

Question 35

Which estimating technique uses an algorithm to calculate cost or duration based on historical data and other project parameters?

A) empirical estimating
B) parametric estimating
C) grass roots estimating
D) analogous estimating

Question 36

Complex projects such as research and development for new products often employ rolling wave planning to estimate costs.Which of the following best describes "rolling wave" planning?

A) Project managers render a definitive estimate for the first stage and an order of magnitude estimate for the remainder of the project.
B) Project managers render an order of magnitude estimate for the first stage and a definitive estimate for the remainder of the project.
C) Project managers render definitive estimates for all stages of the project during initiation.
D) Project managers render an order of magnitude estimate for all stages of the project.

Question 37

The approved time-phased project budget,excluding any management reserves,which can be changed only through formal change control procedures and is used as a basis of comparing actual results,is called a ____:

A) measurement baseline.
B) cost baseline.
C) cost benchmark
D) control account

Question 38

Which estimating technique decomposes the work into detailed pieces for which estimates are prepared and then aggregated into a total quantity for the project?

A) piece meal pricing
B) decomposition estimating
C) bottom-up estimating
D) grass roots estimating

Question 39

Figure 9-1 Time-phased budget
Consider the time-phased budget presented in Figure 9-1.What is the cumulative project budget through the end of April?

A) $ 8.000
B) $20,000
C) $38,000
D) $46,000

Question 40

A project manager needs to ensure that the cumulative amount of cash coming into the project either from internal budgeting or from customer payments meets or exceeds the demands for paying cash out.

Question 41

Describe analogous,parametric and bottom-up estimating,and briefly discuss the advantages and disadvantages of each method.

Question 42

Events discovered during Identify Risks that may or may not occur are often categorized as:

A) known knowns
B) known unknowns
C) unknown unknowns
D) known certainties

Question 43

Discuss how the accuracy of cost estimates becomes more precise during a project.

Question 44

Describe several sources of uncertainty in estimating the cost of a project as well as strategies you can employ to address uncertainty.

Question 45

"Unknown unknowns" are unexpected events which can occur when the project is underway.All of the following accurately describe an implication associated with unknown unknowns EXCEPT:

A) They are usually discovered during risk identification
B) They need to be covered in the project budget.
C) They usually require the use of management reserve.
D) They usually cause an increase in cost and / or schedule.

Question 46

A milestone is a typical measuring point used when establishing cost control.Which of the following DOES NOT accurately describes the use of cost control milestones?

A) Project managers can use their cash flow projections to determine the funding needed to reach each milestone.
B) Project managers and sponsors often decide the number of milestones jointly.
C) Milestones are often identified in the project charter.
D) Milestones are developed during risk planning.