Exam 8: Cost Estimation and Budgeting

A key for developing project cost estimates is to:

A budgeting method that assigns costs first to activities and then to projects based on each project's use of resources is:

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

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

What are parametric cost estimates and how are they developed?

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?

It took 44 hours of analysis to complete the first phase, but the second phase was done in 42 hours. If this learning rate continues, then the 8th analysis should take a mere:

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

What are three benefits to the use of contingency funds?

Which of the following is a direct cost?

Which of the following is NOT contained in a typical time-phased budget?

What is a budget contingency and what are three reasons it might be useful?

Which of these is typically a recurring cost?

A systems analyst is paid at the rate of $50/hour and will be needed for 40 hours. Her employer uses an overhead multiplier of 60% and does not factor in personal time. Her total direct labor cost should be billed at:

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

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

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

Acme is exploring two locations for a new plant to supply product for a government contract. They dispatch a team of industrial engineers and cost estimators to the Minneapolis-St.Paul area of Minnesota and to Kennewick-Pasco-Richland area in Washington. After conducting some tests, the teams return with some unusual findings, the Minneapolis-St. Paul workers seem to obey classic learning effect rules; their learning rate is 80% and is based on a doubling of output. They are much slower than their counterparts at the other site; it is estimated that the first batch units they assemble will take them 700 hours. The workforce in the Kennewick-Pasco-Richland area is much faster; their first batch will take only 470 hours. Strangely, these workers also exhibit learning effects, but their learning is based on a tripling of output rather than the traditional doubling and their rate is 78%. How many batches must be made before Minneapolis-St. Paul's time falls below Kennewick-Pasco-Richland's?

An advantage of top-down budgeting is:

"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: