Question 1

Comparative estimates are more accurate than definitive estimates when applied to the same project.

Accepted Answer

Comparative estimates involve comparing the current project with similar projects from the past, which can provide more accurate estimates. Definitive estimates, on the other hand, involve detailed analysis and can be time-consuming and costly.

Question 2

The __________ is a plan that identifies the allocated resources, the project's goals, and the schedule that allows an organization to achieve those goals.

Accepted Answer

project budget

Question 3

Employing an overhead multiplier is sometimes referred to as the __________ rate for direct labor costs.

Accepted Answer

fully-loaded

Question 4

A time-phased budget allocates costs across both project activities and the anticipated time in which the budget is to be expended.

Accepted Answer

A time-phased budget breaks down project costs into specific time periods, allowing for more accurate tracking and management of project finances. It allocates costs across both project activities and anticipated time frames, which helps project managers to identify potential cost overruns and adjust spending accordingly.

Question 5

Cost estimates can be too low if issues outside a firm's control affect the project organization's ability to complete the project. These __________ might include inflation or political instability.

Accepted Answer

The answer of Cost estimates can be too low if...

Question 6

Activity-based costing is a budgeting method that identifies __________ associated with activities that consume resources.

Accepted Answer

The answer of Activity-based costing is a budgeting method that...

Question 7

A budget contingency of $1 million on a $10 million project means that the project will be planned for a cost of $10 million, but the project organization receives an extra $1 million to guard against unforeseen cost overruns.

Accepted Answer

The answer of A budget contingency of $1 million on...

Question 8

Activity-based costing is based on the notion that projects consume activities and activities consume resources.

Accepted Answer

Activity-based costing is a costing method that assigns costs to products or services based on their consumption of activities, and activities consume resources. Therefore, the statement is true.

Question 9

There is a tendency for different departments or functions to compete for scarce resources in a zero-sum game when bottom-up budgeting is used to develop a project budget.

Accepted Answer

The answer of There is a tendency for different departments...

Question 10

The unofficial rule of thumb for __________ estimates is to aim for an accuracy of plus or minus 30%.

Accepted Answer

The answer of The unofficial rule of thumb for __________...

Question 11

__________ cost estimates can only be given upon the completion of most of the design work at a point when the scope and capabilities of the project are well-understood.

Accepted Answer

The answer of __________ cost estimates can only be given...

Question 12

Direct costs are those clearly assigned to the aspect of the project that generated the cost.

Accepted Answer

Direct costs are those costs that can be easily traced to a specific aspect of a project, such as labor, materials, equipment, and subcontractors, and are therefore directly attributable to that aspect of the project.

Question 13

__________ costs might be those associated with charges applied once at the beginning or end of a project.

Accepted Answer

The answer of __________ costs might be those associated with...

Question 14

An order of magnitude estimate is usually more accurate than a ballpark estimate.

Accepted Answer

An order of magnitude estimate and a ballpark estimate are both rough estimates, but neither is consistently more accurate than the other; the terms are often used interchangeably to describe an approximation.

Question 15

__________ is typically added to the project's budget following the identification of all project costs; that is, the project does not include __________ as part of the activity-based costing process.

Accepted Answer

The answer of __________ is typically added to the project's...

Question 16

Material is an example of a cost that is recurring, variable and direct.

Accepted Answer

Material costs are recurring as they are incurred on a regular basis, variable as they are dependent on the amount of product being produced, and direct as they are specifically related to the production of a specific product.

Question 17

An expedited cost is one that does not vary with respect to their usage.

Accepted Answer

An expedited cost is one that is incurred for a specific purpose or service and can vary based on the amount of usage or speed of delivery needed.

Question 18

__________ begins with the work packages of the work breakdown structure and specifies funds that are needed to support the tasks. These costs are aggregated by managers and duplicate costs are removed as managers' budgets are combined.

Accepted Answer

The answer of __________ begins with the work packages of...

Question 19

A learning rate of 90% means that for every doubling of output, the time required by the activity falls by 10%.

Accepted Answer

A learning rate of 90% means that the output will increase by 90% for every input, not every doubling of output. Therefore, the time required by the activity will not necessarily fall by 10% for every doubling of output.

Question 20

Unplanned costs incurred when steps are taken to speed up the project's completion are __________.

Accepted Answer

The answer of Unplanned costs incurred when steps are taken...

Quiz 8: Cost Estimation and Budgeting