Question 1

What is the project budget for November in this time-phased budget? 
A)$21,000
B)$15,000
C)$18,000
D)$33,000

Accepted Answer

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Question 2

An allocation of extra funds to cover uncertainties and improve chances that the project can be completed within the timeframe originally specified is a:
A)setback.
B)budget contingency.
C)reallocation budget.
D)reserve line budget.

Accepted Answer

A budget contingency is an allocation of extra funds to cover uncertainties and improve the chances that the project can be completed within the originally specified timeframe. It is a common practice in project management to have a contingency budget to manage project risks and uncertainties. Setback refers to a delay or obstacle that negatively affects project progress. Reallocation budget and reserve line budget are not relevant to the context.

Question 3

Provide examples and discuss the differences between direct and indirect costs.

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Question 4

It was fortunate that the project budget included contingency funding;the top manager had not foreseen that the project would need the services of their elite slide rule squad in more than one area at the same time.Design couldn't complete their work without their services,nor could marketing,or production.Contingency funds came in handy to meet the unanticipated:
A)change in project scope.
B)abnormal project conditions.
C)consequences of Murphy's Law.
D)interaction costs.

Accepted Answer

The contingency funds were used to cover the costs of needing the elite slide rule squad in multiple areas simultaneously, which are interaction costs between different departments.

Question 5

What is the total project budget in this time-phased budget? 
A)cannot be determined from the information given
B)$61,000
C)$35,000
D)$71,500

Accepted Answer

The total project budget in this time-phased budget can be found by adding up all the costs across the different time periods. In this case, the total cost across all the periods is $71,500.

Question 6

What is the total amount budgeted for March in this time-phased budget? 
A)$6,000
B)$35,000
C)$41,000
D)$66,000

Accepted Answer

The total amount budgeted for March is the sum of all the monthly budgets from January to March, which is $18,000 + $17,000 + $6,000 = $41,000.

Question 7

What is the cumulative project budget for September in this time-phased budget? 
A)$210,000
B)$152,000
C)$137,800
D)$80,000

Accepted Answer

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Question 8

Rank the four different types of cost estimates from most to least accurate and explain what the inputs are to each type.

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Question 9

What are four major categories of costs? Provide descriptions for each category.

Accepted Answer

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Question 10

The gentleman farmer and surrealist aficionado commissioned a mural on barn that was an homage to Salvador Dalí's Persistence of Memory with a few farm animals included.The project would require the services of a senior muralist,a junior muralist,and a gofer.The senior muralist has an annual salary of $120,000,the junior muralist draws an annual salary of $75,000,and the gofer makes $30,000 per year.It is anticipated that the project will require 25 hours of senior muralist time,40 hours of junior muralist time,and 60 hours of gofer time.Overhead charges vary by position;the gofer has a lower overhead rate (30%)than the two muralist positions (50%).Use 2080 hours as an estimate for the number of hours in a year and a 15% factor for personal time.What is the total direct labor cost for the project?

Accepted Answer

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Question 11

"If anything can go wrong it often will" is an articulation of:
A)Taylor's Theorem.
B)Pinto's Postulate.
C)Murphy's Law.
D)the Pareto Principle.

Accepted Answer

This statement is known as Murphy's Law, which states that if something can go wrong, it likely will. It is often used humorously, but it also reflects the idea that unforeseen issues or problems can arise, even if we have taken precautions to avoid them.

Question 12

Contingency money is:
A)the money that must be received before any project work can begin.
B)money that is spent first to lock-in all contract guarantees.
C)not usually a part of the activity-based costing process.
D)valued at a higher rate than non-contingency money when determining project costs.

Accepted Answer

Contingency money is not typically part of the activity-based costing process, as it is set aside for unexpected costs rather than being allocated to specific activities.

Question 13

A disadvantage of contingency funds is:
A)a recognition that the future contains both knowns and unknowns and the problems that might arise will impact the budget.
B)it is difficult to ascertain across what project activities contingency funds should be applied.
C)that application to the contingency fund gives an early warning signal of a potential overdrawn budget.
D)that provision is made in the company plans for an increase in project cost.

Accepted Answer

Although contingency funds are meant to cover the unexpected costs and risks that may arise during a project, it can be difficult to determine which specific project activities they should be applied to. This uncertainty can lead to confusion and inefficiencies in budget management. The other options listed are actually advantages of contingency funds - recognizing that the future is uncertain and planning for potential budgetary issues, providing an early warning signal for budget overruns, and making provisions for potential cost increases.

Question 14

An early warning signal for the potential of an overdrawn budget is created when:
A)activity-based costing cannot identify drivers.
B)a bottom-up budget never makes it up the chain of command.
C)contingency funds are applied for.
D)a top-down process moves too quickly down to the functional managers.

Accepted Answer

Applying for contingency funds indicates that unexpected expenses have already been incurred or are expected, which means that the budget may be overdrawn.

Question 15

Project cost estimates usually anticipate that resources will be available,that the weather will not be extreme,and that funding will materialize,creating what are called:
A)hyperactivity.
B)standard operating procedures.
C)standard duress.
D)normal conditions.

Accepted Answer

Project cost estimates are usually made under the assumption of normal conditions, which means that resources will be available, the weather will not be extreme, and funding will materialize. This is the baseline scenario for estimating project costs, and any deviations from this normal condition will require adjustments to the estimates. A, B, and C are not relevant terms in this context.

Question 16

What is the total project budget in this time-phased budget? 
A)$210,000
B)$193,000
C)$184,500
D)$178,300

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Question 17

After years of tinkering and reverse engineering initiatives,Kimray had finally unlocked the secrets of the Beta tape format.A quick trip to the rental store was an epiphany for company leadership when they realized that only a handful of Beta tapes were available;the rest of the world had adopted the VHS format seemingly overnight.Now they would have to buy a few of those newfangled VHS machines to see how they ticked.The contingency funds that management had set aside would be put to good use on this:
A)change in project scope.
B)abnormal condition.
C)unanticipated interaction cost.
D)latest evidence of Murphy's Law.

Accepted Answer

The situation described involves a change in project scope because the company had intended to work with Beta tape format, but now they must also incorporate VHS format. This is a deviation from their original plan and requires a shift in focus.

Question 18

What is the total project budget for design in this time-phased budget? 
A)$152,000
B)$106,000
C)$57,000
D)$34,000

Accepted Answer

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Question 19

Explain the difference between normal and expedited costs,fixed and variable costs,and recurring or nonrecurring costs.Create a 2 × 2 × 2 matrix and provide one example each (8 total examples)of each combination of these costs.

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Question 20

A contingency rate of 10% on a building project budgeted at $20 million means the project organization is hoping to bring the project in for around:
A)$22 million.
B)$2 million.
C)$18 million.
D)$200 million.

Accepted Answer

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Quiz 8: Cost Estimation and Budgeting

What is the project budget for November in this time-phased budget?

An allocation of extra funds to cover uncertainties and improve chances that the project can be completed within the timeframe originally specified is a:

Provide examples and discuss the differences between direct and indirect costs.

What is the total project budget in this time-phased budget?

What is the total amount budgeted for March in this time-phased budget?

What is the cumulative project budget for September in this time-phased budget?

Rank the four different types of cost estimates from most to least accurate and explain what the inputs are to each type.

What are four major categories of costs? Provide descriptions for each category.

"If anything can go wrong it often will" is an articulation of:

Contingency money is:

A disadvantage of contingency funds is:

An early warning signal for the potential of an overdrawn budget is created when:

Project cost estimates usually anticipate that resources will be available,that the weather will not be extreme,and that funding will materialize,creating what are called:

What is the total project budget in this time-phased budget?

What is the total project budget for design in this time-phased budget?

Explain the difference between normal and expedited costs,fixed and variable costs,and recurring or nonrecurring costs.Create a 2 × 2 × 2 matrix and provide one example each (8 total examples)of each combination of these costs.

A contingency rate of 10% on a building project budgeted at $20 million means the project organization is hoping to bring the project in for around: