Question 1

What is a time-phased budget and how does it help a project manager control costs?

Accepted Answer

The answer of What is a time-phased budget and how...

Question 2

Contingency money is:
A) Not formally in the project budget, but held in a separate company account for all projects.
B) Added to the project's budget following the identification of all project costs.
C) The first line item in any project budget at an amount dictated by company policy.
D) Not in the project's budget, but calculated and set aside once the project budget is completed.

Accepted Answer

Contingency money is added to the project budget following the identification of all project costs, as a cushion to cover unexpected events and expenses. It is not held in a separate account, predetermined by company policy or calculated and set aside after completing the budget.

Question 3

"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

"If anything can go wrong it often will" is commonly known as Murphy's Law, which states that anything that can go wrong, will go wrong. This phrase is often used to express the idea that even when everything seems to be going well, something unexpected can still happen to cause problems.

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 answer of It was fortunate that the project budget...

Question 5

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 a part of activity-based costing process and is set aside for unexpected events and risks that may arise during the project. It is not spent first or valued higher than non-contingency money. It is not a prerequisite for starting a project, hence option A is also incorrect.

Question 6

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

While contingency funds can be useful in dealing with unforeseen problems, it can be difficult to determine how much money should be allocated to which project activities. Without clear guidelines and criteria for determining when contingency funds should be used, they may not be used effectively or efficiently. The other options listed are not disadvantages of contingency funds.

Question 7

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

The application for contingency funds is a clear signal that the budget may be overdrawn or at risk of going over budget. Contingency funds are typically set aside for unexpected expenses or emergencies, and when they need to be utilized, it indicates that the budget may not have been properly planned or managed.

Question 8

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 the project's total cost into smaller time periods so that the cost can be allocated to the activities that require it. This helps in keeping track of the project's funds and ensures that the project stays on track financially.

Question 9

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

Accepted Answer

Activity-based costing assigns costs to projects based on the activities required to complete them and the resources consumed by those activities.

Question 10

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

A change in project scope has occurred as the company has realized that their focus on Beta tape format is now irrelevant since the rest of the world has moved to VHS. The company now has to pivot their focus towards the VHS machines and adapt their plans accordingly.

Question 11

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 based on normal or standard conditions, assuming that resources, weather, and funding will all be available as anticipated. Hyperactivity, standard operating procedures, and standard duress are not relevant terms in this context.

Question 12

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

This definition corresponds to a budget contingency, which is a designated amount of money set aside to cover unexpected costs or events that may arise during the project timeline. A setback refers to an obstacle or delay that hinders progress, a reallocation budget refers to reallocating funds from one area to another, and a reserve line budget is not a commonly used term in project management.

Question 13

Normal conditions, by definition, occur the vast majority of the time in project management.

Accepted Answer

Normal conditions may not occur the majority of the time in project management. Projects often face unforeseen challenges and changes that require adjustments to the project plan and resources.

Question 14

What is the total project budget for design in this time-phased budget? 
A) $131,279
B) $155,330
C) $124,688
D) $146,983

Accepted Answer

The answer of What is the total project budget for...

Question 15

What is the project budget for November in this time-phased budget? 
A) $8,186
B) $18,409
C) $389,828
D) $408,237

Accepted Answer

The answer of What is the project budget for November...

Question 16

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 17

What is the cumulative project budget for September in this time-phased budget? 
A) $96,052
B) $155,330
C) $152,927
D) $251,382

Accepted Answer

The answer of What is the cumulative project budget for...

Question 18

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

The answer of A contingency rate of 10% on a...

Question 19

"If the weather holds and the utility service has correctly marked the location of the gas, telephone, and electric lines zigzagging across my property, I should be able to install the accent lighting in my back yard in an afternoon's time," the do-it-yourselfer commented to his jealous (and skeptical) neighbor. The only reply he received was his neighbor's, "Good luck with all that, I remember reading somewhere that:
A) Project scope is fixed once the planning period is completed."
B) Normal conditions are rarely encountered."
C) There are no truly external factors in project execution."
D) Activity based costing shouldn't be used in a project of this scale."

Accepted Answer

The neighbor's comment alludes to the fact that normal conditions are rarely encountered in project execution, suggesting that unexpected or unforeseen problems may arise during the installation of the accent lighting. This highlights the importance of considering potential risks and contingencies in project planning and management. The other statements (A, C, and D) do not seem relevant to the situation described.

Question 20

What is activity-based costing and how is it performed?

Accepted Answer

The answer of What is activity-based costing and how is...

Quiz 8: Cost Estimation and Budgeting

What is a time-phased budget and how does it help a project manager control costs?

Contingency money is:

"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:

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

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

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:

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

Normal conditions, by definition, occur the vast majority of the time in project management.

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

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

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.

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

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:

What is activity-based costing and how is it performed?