Deck 9: Estimating and Managing Costs

Question 1

The money needed to pay for a project is usually transferred to the project account shortly before it is needed.

Answer 1

True

Question 2

If the cost estimates by vendors are much higher than expected and if the project cannot be completed for the cost that was used to select the project, the selection decision might have to be reconsidered.

Answer 2

True

Question 3

On projects with low complexity, the cost estimates can be done on spreadsheet software.

Answer 3

True

Question 4

If estimates are rarely exceeded, the estimating method need not be reviewed.

Question 5

An activity cannot have costs from more than one vendor.

Question 6

The methods used to estimate the cost of a project during the selection phase are generally slower and consume more resources than those used to create detailed estimates in later phases.

Question 7

The detailed cost estimates for each activity in the project is the actual cost of work performed.

Question 8

The difference between the earned value and the actual cost is the cost performance index.

Question 9

The schedule variance is the difference between the earned value and the planned value.

Question 10

Earned value management allows for partial completion of an activity if some of the detailed costs associated with the activity have been paid but others have not.

Question 11

Measures such as percentage of activities completed or percentage of measurement units completed are adequate for high complexity projects.

Question 12

Contractual agreements with vendors always require full payment of their costs during the project.

Question 13

A positive cost variance indicates the project is under budget.

Question 14

Unlike management reserves, contingency reserves are not likely to be spent and are not part of the project's budget baseline, but they can be included in the total project budget.

Question 15

The project manager prefers to keep the company's money working in other investments until the last moment before transferring it to the project account.

Question 16

The process of subtotaling costs by category is called reconciliation.

Question 17

To calculate the ETC, the manager must decide if the schedule variance observed in the estimates to that point are representative of the future.

Question 18

If services or products will be provided by vendors, the cost of those services can be determined by issuing an RFP.

Question 19

It is possible to calculate how much money needs to be spent by any particular date during a project.

Question 20

The schedule variance and the cost variance provide the amount by which the spending is behind or ahead of) schedule and the amount by which a project is exceeding or less than) its budget.

Question 21

The process of subtotaling costs by category or activity is called _____.

A) parametric estimating
B) reserve analysis
C) alignment process
D) cost aggregation
E) reconciliation

Question 22

To calculate the EAC, the estimate to complete ETC) is added to the actual cost AC) of the activities already performed.

Question 23

The process of matching funds provided with funds spent is called _____.

A) parametric estimating
B) reserve analysis
C) alignment process
D) cost aggregation
E) reconciliation

Question 24

_____ refers) to decisions based on incomplete information made by people who have extensive personal experience.

A) Guesswork
B) Top-down estimation
C) Bottom-up estimation
D) Speculation
E) Expert judgment

Question 25

_____ is money that is available for changing the scope of the project.

A) Management reserve
B) Planned reserve
C) Budget reserve
D) Surety reserve
E) Contingency reserve

Question 26

Which of the following is

A) The project manager prefers to keep the company's money working in other investments until the last moment before transferring it to the project account.
B) If estimates are rarely exceeded, the estimating method need not be reviewed.
C) Occurrences that increase costs above the original estimates are uncommon in projects.
D) Instead of underestimating each cost, money is budgeted for dealing with planned but statistically unpredictable cost increases.
E) It is not possible to predict which activities cost more than expected but it is reasonable to assume that some of them will be.

Question 27

If the costs of the activities up to the present vary from the original estimates, it will affect the total estimate for the project cost.

Question 28

_____ are measurable factors that can be used in an equation to calculate a result.

A) Humm factors
B) Free floats
C) Attributes
D) RFPs
E) Parameters

Question 29

_____ is the money held to pay for predictable but unspecified extra costs.

A) Planned reserve
B) Surety reserve
C) Contingency reserve
D) Management reserve
E) Budget reserve

Question 30

Estimate to complete equals budget at completion minus schedule variance, i.e., ETC = BAC − SV.

Question 31

Contractual agreements with vendors can be managed more conveniently if the unit of measure for partial completion is the same as that used for _____.

A) resource planning
B) cost control
C) cost budgeting
D) cost aggregation
E) cost estimating

Question 32

Estimates in the earliest stages of project selection are usually made using estimates based from previous projects that can be _____-multiplied by an adjustment factor to make the new estimate proportional to the original.

A) aggregated
B) subtotaled
C) scaled
D) predefined
E) rolled up

Question 33

In estimating costs to compare and select projects, which of the following is

A) Social factors are the most important consideration when choosing between competing projects.
B) The methods used to estimate the cost of the project during the selection phase are slower than those used to create detailed estimates in later phases.
C) The amount of time and resources used to make estimates should be appropriate primarily to the location of the project.
D) Estimates in the earliest stages of project selection are usually made using estimates based from previous projects.
E) Experienced managers can make accurate estimates only with more detailed information.

Question 34

The most accurate and time-consuming estimating method:

A) uses the statistical relationship that exists between historical data and a particular delineated list of other variables.
B) is to identify the cost of each item in each activity of the schedule, including labor and materials.
C) uses the actual costs from previous projects as a basis for estimating the costs for the current project.
D) involves scaling estimates which are based on other project estimates upward or downward.
E) involves sorting detailed cost estimates by activity and then subtotaling activities to determine the cost for each activity.

Question 35

A request for proposal RFP):

A) is used to gather vendor information from various companies to generate a group of prospects.
B) is a formal arrangement in a partnership to execute a project with each party contributing resources.
C) involves a supplier who might bypass the bidding process on account of having a special relationship with the project.
D) requires a bidder to offer solutions and ideas on how to perform the scope of work and a price for performing that work.
E) defines the relationship between the project and subcontractors.

Question 36

If the money needed to pay for a project is transferred to the project too far in advance:

A) the process of reconciliation becomes easier.
B) there will be a delay in the start of the project or the activity.
C) the organization will lose the opportunity to use the money somewhere else.
D) the organization will end up paying lesser interest charges if the money is borrowed.
E) the organization will have access to funds as and when they are needed.

Question 37

Which of the following is

A) Contingency reserves are not likely to be spent.
B) Management reserves are not part of the project's budget baseline.
C) Management reserves are not included in the total project budget.
D) Management reserves are likely to be spent.
E) Contingency reserves are not part of the total budget for the project.

Question 38

Reconsidering the selection of the project should take into consideration the _____ of the competing projects that were not chosen and who the _____ are for the projects that would be affected.

A) internal rate of return; vendors
B) economic ratings; project champions
C) level of complexity; suppliers
D) project teams; stakeholders
E) project schedules; project managers

Question 39

If a project consists of activities that are common to many other projects, _____ are available per unit.

A) fixed costs
B) variable costs
C) average costs
D) total costs
E) marginal costs

Question 40

A budget estimate based on a similar project is an) _____ estimate.

A) subtotaled
B) analogous
C) parametric
D) top-?bottom
E) bottom-up

Question 41

Define the terms budgeted cost of work performed BCWP), earned value EV), and actual cost AC).

Question 42

At the end of three months, the cost factors in A&B's healthcare project are as follows: Earned value = $17,000, Actual cost = $18,200. What is the cost variance CV) and cost performance index CPI) for the project?

A) $+1,200; 1.07
B) $-1,200; 0.93
C) $-1,200; 1.07
D) $+35,200; 0.93
E) $+35,200; 1.07

Question 43

_____ is the difference between the earned value and the planned value.

A) Earned value
B) Actual cost
C) Resource flow variance
D) Cost variance
E) Schedule variance

Question 44

_____ is the detailed cost estimates for each activity in the project.

A) Actual cost
B) Cost Performance Index
C) Budgeted cost of work scheduled
D) Earned value
E) Actual cost of work performed

Question 45

_____ is the revised project budget based on actual cost to date plus the estimate to complete.

A) Cost variance
B) Budgeted cost of work performed
C) Estimate at completion
D) Planned value
E) Budget at completion

Question 46

_____ is the sum of the items in the budgeted cost of work scheduled that should have been spent by a particular day.

A) Cost Performance Index
B) Cost variance
C) Earned value
D) Budgeted cost of work performed
E) Planned value

Question 47

_____ is the budget for the entire project.

A) Planned value
B) Actual cost
C) Earned value
D) Budget at completion
E) Estimate to complete

Question 48

What is a request for proposal RFP)?

Question 49

Which of the following indicates that a project is behind schedule?

A) A SPI value less than one
B) A SPI value more than one
C) A SPI value equal to one
D) A negative CV
E) A positive CV

Question 50

Describe earned value management EVM).

Question 51

_____ is the sum of money spent so far.

A) Target cost
B) Estimated cost
C) Standard cost
D) Actual cost
E) Predetermined cost

Question 52

_____ is the sum of budgeted expenses up to a particular point in the schedule.

A) Planned value
B) Earned value
C) Budgeted cost of work scheduled
D) Cost Performance Index
E) Actual cost

Question 53

A positive cost variance CV) indicates that the project is _____.

A) behind schedule
B) under budget
C) over budget
D) on schedule
E) ahead of schedule

Question 54

Compare and contrast contingency reserves and management reserves.

Question 55

Cost variance CV) is _____.

A) earned value minus actual cost
B) earned value minus planned value
C) the ratio of earned value to planned value
D) the ratio of earned value to actual cost
E) budget at completion minus the earned value

Question 56

_____ is the estimate of the amount of money needed to fill the unfinished part of the project.

A) Budget at completion
B) Estimate to complete
C) Schedule Performance Index
D) Cost Performance Index
E) Budgeted cost of work performed

Question 57

What are parameters and parametric estimates?

Question 58

_____ is a method of comparing the budgeted and actual costs of a project periodically during the project.

A) Configuration management
B) Risk management
C) Change management
D) Earned value management
E) Contract management

Question 59

Which is the most accurate and time-consuming estimating method? Explain.

Question 60

Jean is managing a project in his organization. The planned value for this project is $4,500. At the end of eight weeks, he finds that his earned value is $3,500. What is the present schedule variance for the project? What does the variance signify?

A) $-1,000; behind schedule
B) $+1,000; ahead of schedule
C) $-1,000; on schedule
D) $+1,000; on schedule
E) $+1,000; behind schedule

Question 61

The ratio of the earned value to the planned value is the _____.

Question 62

During the project, the manager can evaluate the _____ using the cost variance CV) and the cost performance index CPI).

Question 63

The RFP is sent to a list of vendors who are _____ -meet standards of reliability and capability-to perform the required work.

Question 64

Estimates that are calculated by multiplying measured parameters by cost-per-unit values are _____ estimates.

Question 65

The term _____ refers to the budgeted cost of work scheduled that has been done.