Question 1

The key to managing cash flow is to ensure that cash comes in faster than it goes out.

Accepted Answer

This statement is true. It is important to have more cash coming into the business than going out in order to avoid a shortage of funds and ensure the business can meet its financial obligations.

Question 2

The total project cost is often estimated during the_______ phase of the project or when the project charter or a proposal is prepared
A) initiating
B) planning
C) performing
D) closing

Accepted Answer

The total project cost is often estimated during the initiating phase of the project or when the project charter or a proposal is prepared. This early estimation helps in defining the project's scope and securing initial funding or approval.

Question 3

Based on analysis of actual cost it is possible to forecast what the total costs will be at the completion of the project or work package.

Accepted Answer

This statement is true. By analyzing actual costs, it is possible to forecast what the total costs will be at the completion of the project or work package. This helps in better project planning and budgeting.

Question 4

It is important to manage the cash flow on a project.

Accepted Answer

Managing cash flow on a project ensures that there is enough money to cover expenses and that payments can be made on time, avoiding delays and potential financial issues. It is an important aspect of project management.

Question 5

It is good practice to have the person who will be responsible for the costs associated with the work make the cost estimates.

Accepted Answer

The person who will be responsible for the costs associated with the work will have a better understanding of the financial constraints and priorities, and will be able to make more informed decisions when estimating costs.

Question 6

Historical data can be used as a guide on the current project.

Accepted Answer

Historical data can provide valuable insights and information for current projects especially in terms of identifying risks and predicting outcomes. However, it should be noted that historical data should be analyzed carefully and not relied on blindly as each project and situation may be unique.

Question 7

Equipment costs in the project costs estimate are for equipment
A) that the organization wants to have.
B) that is the latest upgrade, even if not needed for the project.
C) that must be purchased as part of the project.
D) needed by others in the organization that may not be assigned to the project.

Accepted Answer

Equipment costs included in the project costs estimate are for the equipment that must be purchased or leased specifically for the project. This equipment is essential for the completion of the project and is a direct cost associated with the project. Equipment that is not needed for the project should not be included in the cost estimate. Equipment that the organization wants to have or that is needed by others in the organization that may not be assigned to the project are not directly related to the project expenses and should not be included in the project cost estimate. The latest upgrade of equipment may also not be necessary for the project and should not be included in the cost estimate unless it is needed for the completion of the project.

Question 8

The worst scenario from the contractor's point of view is to have the customer make only one payment at the end of the project.

Accepted Answer

This is because the contractor will have to cover all expenses and pay their workers throughout the duration of the project without any income until the end. This can put a strain on their cash flow and potentially lead to financial issues. It is better for the contractor to have a payment schedule in place throughout the project to ensure a steady stream of income.

Question 9

If you put off corrective actions until some point in the distant future, the negative cost variance may deteriorate in the project.

Accepted Answer

If corrective actions are delayed, the negative cost variance (the difference between actual cost and planned cost) may worsen over time, leading to greater cost overruns and potentially delaying project completion. It is important to address cost variances and take corrective actions in a timely manner to prevent further deterioration.

Question 10

The percent complete estimate for a work package is subjective and requires an underestimated guess compared to the scope of the work package.

Accepted Answer

The percent complete estimate for a work package should be based on objective criteria and measurements of work performed, rather than an underestimated guess. It involves assessing the actual work completed compared to the planned work scope.

Question 11

In many cases, there will be a tradeoff-reducing cost variances will involve a reduction in project scope or a delay in the project schedule.

Accepted Answer

This is true because reducing cost variances often means cutting back on certain aspects of the project or pushing back the timeline, both of which can result in a reduction in scope.

Question 12

Materials costs in the project costs estimate are the estimated costs of materials that the project team or contractor
A) want to have in supply in the office.
B) needs even if not for this particular project.
C) needs to purchase for the project.
D) might want to use on the project.

Accepted Answer

Materials costs in the project costs estimate are the estimated costs of materials that the project team or contractor needs to purchase for the project. These materials are necessary for the completion of the project and are included in the overall budget estimate. Option A is incorrect because the materials are not necessarily kept in the office, and option D is incorrect because the materials are not optional but necessary for the project. Option B may include some materials, but it is not limited to them and may also include others that are specifically needed for this project.

Question 13

The key to effective cost control is to analyze cost performance on a regular and timely basis.

Accepted Answer

Regular and timely analysis of cost performance is essential to identify areas where costs are exceeding expectations and take corrective actions to control them. This helps in maintaining profitability and achieving organizational goals.

Question 14

Cost estimates should be unreasonable and excessive.

Accepted Answer

Cost estimates should be reasonable and based on market standards, not excessive or unreasonable. This ensures that the project remains cost-effective and feasible.

Question 15

The key to effective cost control is waiting to address negative cost variances and cost inefficiencies after they are identified.

Accepted Answer

The key to effective cost control is to proactively monitor and identify cost variances and inefficiencies as early as possible, and then take corrective action to address them in a timely manner. Waiting to address them after the fact can lead to larger costs and losses in the long run.

Question 16

When the CPI goes below 1.0 or gradually gets smaller, corrective action should not be taken, the project is performing well.

Accepted Answer

A CPI (Cost Performance Index) below 1.0 indicates that the project is over budget, suggesting that corrective action may be necessary to improve cost performance.

Question 17

Cumulative actual cost (CAC) should be calculated to compare to the cumulative budgeted cost (CBC).

Accepted Answer

Cumulative actual cost (CAC) is calculated to measure the actual expenditure incurred on a project up to a specific point in time. It is important to compare it to the cumulative budgeted cost (CBC) to evaluate project performance and identify any variances between actual costs and the estimated budgeted costs.

Question 18

Labor costs in the project costs estimate are the estimated costs for the various types or classifications of ___________ and are based on the estimated work time (not necessarily the same as the activity estimated duration) and the dollar labor rate for each.
A) people who are expected to work on the project
B) people, even if they are not directly assigned to the project
C) overhead and direct expenses
D) subcontractors

Accepted Answer

Labor costs in the project costs estimate are based on the estimated work time and the dollar labor rate for each type or classification of people who are expected to work on the project. This includes employees, contractors, and other individuals specifically assigned to work on the project. Labor costs for people who are not directly assigned to the project would not be included in this estimate. Overhead and direct expenses, as well as subcontractor costs, are separate from labor costs.

Question 19

Committed costs are also known as discharged or postponed costs.

Accepted Answer

Committed costs refer to expenses a company has already made a commitment to pay and cannot easily be altered or avoided, unlike discharged or postponed costs, which imply costs that have been settled or delayed.

Question 20

In many projects, large dollar amounts are expended for materials or services (subcontractors, consultants) that are used over a period of time longer than one cost reporting period.

Accepted Answer

It is common for projects to have expenses for materials or services that are used over a longer period of time than just one cost reporting period, which can lead to large dollar amounts being expended over time.

Quiz 7: Determining Costs, Budget, and Earned Value