Exam 8: Cost Estimation and Budgeting

Poor initial scope development and work breakdown structure often creates cost overruns that are attributable to:

Describe any three reasons that cost overruns occur in project work.

If it takes 40 hours to complete the first unit and the company knows from experience that the learning rate should be 0.80, how fast can they be expected to finish all twelve units?

Workers paid $15.00 per hour with an overhead charge of 1.45 and a personal time allowance of 1.15, have what total direct labor cost for an 8-hour work day?

The charge that is most likely a fixed cost is for:

It took 66 hours of analysis to complete the first phase, but the second phase was done in 61 hours. If this learning rate continues, then the 8^th analysis should take a mere:

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

Big Mike has to prepare a bid for the swimming pools to be placed in every backyard in a new housing addition. Each swimming pool represents only a slight variation on the other, so there is a good opportunity to leverage learning effects in the bid process. A swimming pool installation can be broken down into four major steps: excavation, concrete, plumbing, and finish work. Mike has found the best contractors and asks each of them how long it will take to complete work on the first pool and what their learning rates are. Amazingly, each contractor is intimately familiar with learning curve theory and knows what his learning rate is for this type of work. This information is summarized in the table. How long will it take to complete the 25th pool for the subdivision? How long will it take to complete all 25 pools for the subdivision?

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:

The term expedited cost has the same meaning as crashing cost in the project management milieu.

There was no way that the study tour to Italy could cost only $1500 for 14 days and 13 nights and include all transportation, meals and hotels, but the smarmy professor knew that students would balk at a higher advertised price. Once they were thousands of miles away from home in a country where none of them spoke the language it would be easier to tell them about unanticipated charges and approach the more realistic price of $3500 per person. This type of:

A disadvantage of contingency funds is:

The 1974 model Eldorado is a three-ton behemoth with a 500-cubic-inch engine that is long on style but short on gas mileage. During its five-year development process no one could possibly have anticipated that gas prices would go through the roof in 1973, making it far more expensive to operate and subsequently less attractive to a gas-price-conscious public. Design engineers scrambled to change the car in the last few months leading up to its debut, adding a slimmed down version with a smaller engine. All of the design overtime meant that the project budget took a big hit though, thanks to:

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

Which worker's wages would constitute a direct cost for a construction project?

It began as a simple macro that would extract grades and post them on a web site, but once the web programmer began the work, he became obsessed with various charting features, grade summaries, and reports that could be added to make this the grandest web site in the tri-county area. As 2 hours of programming work grew to 20 and then 80, he knew that the client wouldn't be happy with the cost overrun. The only comment he mumbled as he finished his work was:

Juan Valdez trades in his old donkeys for two new llamas in order to transport his mountain grown coffee to the marketplace. Llamas make excellent pack animals and are surefooted, so I should be able to spend more time harvesting and less time wrangling animals, Juan thought to himself as he led the two back to his mountain farm. Much to his dismay, the first time he tried to strap the bags of coffee beans to his new llamas they resisted by running away and when he got close, they spit copiously. However, he was persistent and methodical, and he noticed that things went a little better each day. The time it took to get the llamas loaded up is summarized in the table. What learning rate is evident from the data? How long will it take to load up the llamas next month (on the 30th attempt) if the same learning pattern continues?

How are top-down and bottom-up budgets created? What advantages does each approach hold over the other?

Once most of the design work is complete, at a point when the scope and capabilities of the project are quite well understood, a ________ may be developed.

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: