Question 1

Fixed costs remain constant over time,whereas variable costs may change directly as a function of time.

Accepted Answer

Fixed costs remain constant regardless of production levels, not time, while variable costs change with the level of production, not directly with time.

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

Parametric estimating often requires more detailed information and can be more time-consuming because it involves the use of statistical data and mathematical models to estimate project costs or durations, whereas analogous estimating is quicker and requires less information as it is based on comparing the current project with past similar projects.

Question 4

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

Accepted Answer

Both normal and special cause variation can cause project cost to increase and should be taken into account by project managers. Normal cause variation is inherent in the process and can be reduced with process improvement, while special cause variation is caused by external factors and should be addressed as they occur.

Question 5

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

Accepted Answer

Fixed costs remain constant regardless of changes in volume, while variable costs change in proportion to changes in volume. Therefore, decisions related to these costs are highly dependent on volume-related factors. Project scope can also impact fixed and variable costs, as changes in project size or requirements may require adjustments to these costs.

Question 6

The document that establishes the activities and criteria for planning,structuring and controlling the project costs is the project financial plan.

Accepted Answer

The document that establishes the activities and criteria for planning, structuring, and controlling project costs is typically called the "cost management plan," not the "project financial plan."

Question 7

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

Accepted Answer

Cost management plan for small projects may not require detailed cost control procedures, and may focus on these few elements.

Question 8

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

Accepted Answer

Cost estimating involves predicting the amount of money that will be required to complete a project, which is dependent on the project scope, schedule, and resources. Without a clear understanding of the project scope, schedule, and resources, it is difficult to accurately estimate the project costs. Therefore, cost estimating is closely linked with scope, schedule, and resource planning.

Question 9

Accrual accounting is more frequently used on projects than cash accounting.

Accepted Answer

The answer of Accrual accounting is more frequently used on...

Question 10

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

Accepted Answer

Inflating the value of future revenue and cost streams actually distorts the true value due to the time value of money. The correct approach is to discount future revenue and cost streams to their present value to accurately account for the time value of money.

Question 11

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.

Accepted Answer

Even early in a project, it is possible to render a rough estimate of the final project cost using techniques such as analogous estimating, parametric estimating, and expert judgment. These estimates are crucial for initial budgeting and decision-making processes.

Question 12

Estimates of the likely amount a project will cost should always include an indication of accuracy.

Accepted Answer

This helps stakeholders to understand the level of uncertainty in the estimate and make informed decisions based on it.

Question 13

Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish a cost baseline.

Accepted Answer

This statement accurately describes the process of Determine Budget in project management.

Question 14

The cost management plan establishes the format and criteria for planning and controlling the project costs.

Accepted Answer

The cost management plan is a document that lays out the framework for planning and controlling project costs. It specifies the format and criteria for estimating, budgeting, and monitoring costs, as well as identifying roles and responsibilities for the project team. Therefore, the statement given in the question is true.

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.

Accepted Answer

Direct costs are costs that can be easily and accurately traced to a particular product or service. Direct labor is a typical example of a direct cost. Other direct costs may include the cost of materials, travel expenses, subcontracted services, and computer time used for a specific project or job.

Question 16

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.

Accepted Answer

Bottom-up estimating involves breaking down the project into smaller, more manageable components and estimating the cost for each component, which can be used as a basis for estimating cash flow needs and for controlling the project. Therefore, most projects will employ bottom-up estimating at some point.

Question 17

Project managers are encouraged to avoid overly conservative cost estimates because the resulting estimate may be too high to approve.

Accepted Answer

Overly conservative cost estimates may result in a budget that is too high, which could result in the project not being approved. Therefore, project managers are encouraged to provide reasonable, accurate, and justifiable cost estimates.

Question 18

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

Accepted Answer

Special cause variation is caused by an unusual event or circumstance that is not expected to occur regularly.

Question 19

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

Accepted Answer

Analogous estimating is a quick and rough way of estimating based on similarities to previous projects. It is not the most detailed or accurate way of estimating.

Question 20

Typically,expedited costs are preferred over regular costs.

Accepted Answer

Expedited costs are usually higher than regular costs because they involve faster processing and delivery, which is why they are not typically preferred unless time is a critical factor.

Quiz 9: Budgeting Projects