Question 1

Define the term learning rate.

Accepted Answer

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Question 2

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

Accepted Answer

Expected value = (0.3 * $500,000) + (0.7 * $100,000) = $220,000

Question 3

Rachel, a project manager, has undertaken a project to build a wall around a compound. She estimates that the cost of materials will be $520 and labor costs will be $10 for 20 hours. If the overheads for this project are 50 percent of the labor and material costs, the total cost will be:
A) $1080.
B) $1,560.
C) $880.
D) $780.
E) $960.

Accepted Answer

The total cost of materials and labor is $520 (materials) + $200 (labor, calculated as $10 * 20 hours) = $720. The overheads are 50% of this sum, which is $360 ($720 * 0.5). Therefore, the total cost is $720 (materials and labor) + $360 (overheads) = $1080. However, the correct calculation leads to a total of $1080, indicating a mistake in the choice selection. The correct answer should be $1080, but it's not listed correctly among the choices provided based on the calculation.

Question 4

Risk management includes what three areas?

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Question 5

Devon, a project manager, is working on a software development project. He needs more coders to complete the project on time. As a result, he hires people and they are given on-the-job training by their coworkers. However, this significantly reduces the output of the team and leads to a delay in the project. The given scenario exemplifies:
A) integration management.
B) systems engineering.
C) the mythical man-month effect.
D) the boomerang effect.
E) the sleeper effect.

Accepted Answer

The scenario exemplifies the mythical man-month effect, which refers to the idea that simply adding more people to a project can actually end up causing delays and reducing output due to the time it takes to train new team members and integrate them into the project. This is a well-known phenomenon in project management and warns against the assumption that more resources will always result in faster project completion.

Question 6

Sean, a project manager, has to prepare the budget for a new project. He estimates the overall project cost by estimating the costs of the major tasks. He then gives these estimates to Raphael, an engineer who works under Sean, to split up the costs for each of the activities involved in accomplishing the major tasks. In this scenario, Sean is using _____.
A) top-down budgeting
B) bottom-up budgeting
C) agile project budgeting
D) dynamic matrix budgeting
E) lateral budgeting

Accepted Answer

Sean is using top-down budgeting because he starts with a broad estimation of the project cost and then breaks it down into smaller parts.

Question 7

Briefly explain how learning curves can help improve the cost estimating process.

Accepted Answer

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Question 8

Samuel, a project manager, and Martha, his subordinate, are working on a project. In the budgeting phase, Samuel is responsible for estimating the costs for Level 1 tasks and Martha is responsible for estimating the costs for Level 2 tasks. While collating the data, Samuel finds that the total estimated cost for Level 1 tasks is much lower than the total estimated cost for Level 2 tasks. Which of the following is a reason for this discrepancy?
A) Subordinates tend to have more experience than higher management in allocating costs.
B) Project managers are naturally pessimistic and want to build in protection for everything that might possibly go wrong.
C) Subordinates are usually optimistic and never admit that details have been forgotten or that anything can or will go wrong.
D) Jobs always look easier, faster, and cheaper to the project manager than to the subordinates who have to do them.
E) Project managers and subordinates are often dishonest in their estimations.

Accepted Answer

Jobs often appear simpler, quicker, and less costly to project managers than to the subordinates tasked with executing them. This perspective difference can lead to lower cost estimations by project managers for higher-level tasks compared to the more detailed and potentially higher cost estimations by subordinates for the tasks they are directly involved with.

Question 9

Pogmon Solutions, a computer manufacturer, is introducing a new product-a high-end gaming laptop. Its technicians take 21 hours to produce the first unit of the laptop, and the company follows a 78 percent learning curve. Given this information, the eighth unit of the laptop would approximately require _____.
A) 8 hours
B) 6 hours
C) 5 hours
D) 10 hours
E) 2 hours

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Question 10

Stefan, a project manager in a publishing company, has undertaken a project to translate a book in French into English and to sell a million copies. He estimates that the cost of the materials will be $6000 and the project will require 30 hours of labor at $50 per hour. If the overheads for the project are estimated at a rate of 50 percent of the labor costs, the total cost of the project will be:
A) $1080.
B) $1,500.
C) $4,500.
D) $7,800.
E) $8,250.

Accepted Answer

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Question 11

Define top-down and bottom-up budgeting.

Accepted Answer

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Question 12

Victoria, an artisan who produces handcrafted furniture, has to carve six ornate chairs to go around a table. It takes her 10 hours to complete the first chair. She estimates that her learning rate is 80 percent. Given this information, Victoria should be able to make the second chair in _____.
A) 8 hours
B) 6.3 hours
C) 5.12 hours
D) 3 hours
E) 2.12 hours

Accepted Answer

The learning rate of 80% implies that each subsequent chair takes 80% of the time it took to make the previous one. Therefore, the second chair would take 80% of 10 hours, which is 8 hours.

Question 13

Explain how you would use the shape of a project's life cycle to resolve budget conflicts between a superior and subordinate.

Accepted Answer

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Question 14

How can you handle changes in the project budget?

Accepted Answer

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Question 15

Contrast between activity budgeting and program budgeting.

Accepted Answer

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Question 16

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

Accepted Answer

The total task cost is calculated by adding the labor cost, material cost, and overhead. Labor cost is 20 hours * $25/hour = $500. Overhead is 30% of labor, so $500 * 30% = $150. Adding these to the material cost ($500), the total is $500 (labor) + $150 (overhead) + $500 (material) = $1,150.

Question 17

Victor, a project manager, is constructing a budget for a project to construct a house. He estimates that the materials will cost $100,000 and the project will require 15 people working 6 hours a day to ensure timely completion. He estimates the cost of labor at $15 per hour. Additional costs, safety equipment, and overheads are marked at a rate of 50 percent of direct labor. In this scenario, the total cost of the project will be _____.
A) $120,000
B) $102,025
C) $100,090
D) $100,900
E) $110,510

Accepted Answer

The cost of labor can be calculated as follows:

15 people working for 6 hours a day for the duration of the project (let's assume it takes 60 days to complete) = 15 x 6 x 60 = 5,400 hours

Cost of labor = 5,400 x $15 = $81,000

Total direct cost = Materials + Labor = $100,000 + $81,000 = $181,000

Additional costs, safety equipment, and overheads = 50% of direct labor = 0.5 x $81,000 = $40,500

Total cost of the project = Direct cost + Additional costs = $181,000 + $40,500 = $221,500

However, the question asks for the total cost of the project, which means we need to add the direct cost and the additional costs together:

Total cost of the project = $100,000 + $221,500 = $321,500

Therefore, the correct answer is B) $102,025.

Question 18

Explain how budget uncertainty changes as a project progresses.

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Question 19

After major risk are identified which of the following data should NOT be obtained for analysis
A) probability of each risk occurring
B) Range or distribution of possible outcomes
C) probability of each outcome
D) the expected time of each outcome
E) the person responsible for each outcome

Accepted Answer

The person responsible for each outcome is not relevant information for analysis of major risks. The other data listed (probability of risk occurrence, range/distribution of outcomes, probability of each outcome, and expected time of each outcome) are all important for analyzing and managing major risks.

Question 20

Briefly contrast the three different perspectives cost can be viewed from.

Accepted Answer

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Quiz 4: Budgeting the Project

Define the term learning rate.

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?

Rachel, a project manager, has undertaken a project to build a wall around a compound. She estimates that the cost of materials will be $520 and labor costs will be $10 for 20 hours. If the overheads for this project are 50 percent of the labor and material costs, the total cost will be: