Deck 9: Budgeting Projects

Question 1

Fixed costs remain constant over time,whereas variable costs may change directly as a function of time.

Answer 1

False

Question 2

Recurring costs tend to occur during project planning and closing while nonrecurring costs tend to occur during project execution.

Answer 2

False

Question 3

Generally,parametric estimating requires less information and time than analogous estimating.

Answer 3

False

Question 4

Both normal and special cause variation add to project cost and need to be considered by project managers.

Question 5

Decisions related to fixed and variable costs are very sensitive to changes in volume related factors and project scope.

Question 6

The document that establishes the activities and criteria for planning,structuring and controlling the project costs is the project financial plan.

Question 7

On small projects,the cost management plan may simply address the accuracy of estimating,the source of funding and cost reporting procedures.

Question 8

Cost estimating is linked very closely with scope,schedule and resource planning.

Question 9

Accrual accounting is more frequently used on projects than cash accounting.

Question 10

Inflating the value of future revenue and cost streams to account for the time value of money enables better project decisions.

Question 11

Early in a project when very little detail is known about a project,it is impractical to render even a rough estimate of the final project cost.

Question 12

Estimates of the likely amount a project will cost should always include an indication of accuracy.

Question 13

Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish a cost baseline.

Question 14

The cost management plan establishes the format and criteria for planning and controlling the project costs.

Question 15

Direct costs typically include the cost of direct labor as well as other direct costs for items such as material,travel,subcontracts and computer time.

Question 16

Most projects will employ bottom-up estimating at some point to serve as a basis for estimating cash flow needs and for controlling the project.

Question 17

Project managers are encouraged to avoid overly conservative cost estimates because the resulting estimate may be too high to approve.

Question 18

Special cause variation arises when something out of the ordinary occurs.

Question 19

Analogous estimating is the most detailed,time consuming and accurate way to estimate.

Question 20

Typically,expedited costs are preferred over regular costs.

Question 21

Costs that repeat as project work continues such as writing code are appropriately classified as:

A) fixed costs.
B) indirect costs.
C) nonrecurring costs.
D) recurring costs

Question 22

Which estimating technique uses the cost from a previous project along with measures of scale to estimate the cost for a similar,future project?

A) analogous estimating
B) parametric estimating
C) bottom-up estimating
D) Monte Carlo estimating

Question 23

In addition to optimizing project costs,value engineering can also be used to expand market share.

Question 24

There are many causes of variation in project costs. Which of the following accurately describes the nature of this variation?

A) Variation is generally greater on projects that use well-known technology and an experienced project team.
B) Variation occurs in all work processes and the novelty associated with most projects creates many opportunities for variation.
C) Special cause variation comes from many small causes that are inherent in a work process.
D) Special cause variation is when something ordinary occurs

Question 25

Complex projects such as research and development projects often employ rolling wave planning to estimate project costs. Which of the following best describes "rolling wave" planning?

A) Project managers render a definitive estimate for the next stage and an order of magnitude estimate for the remainder of the project.
B) Project managers render an order of magnitude estimate for the next stage and a definitive estimate for the remainder of the project.
C) Project managers render a definitive estimate for all stages of the project during the initiation stage.
D) Project managers render an order of magnitude estimate for all stages of the project

Question 26

The documentation of a project cost estimate generally requires substantial supporting detail to include all of these EXCEPT:

A) a description of scope.
B) management reserve needs
C) the estimating methods used and a range of possible outcomes.
D) assumptions and constraints.

Question 27

Which estimating technique decomposes the work into detailed pieces for which estimates are prepared and then aggregated into a total quantity for the project?

A) piece meal pricing
B) decomposition estimating
C) bottom-up estimating
D) grass roots estimating

Question 28

Vendor bid analysis is used to determine whether the price being asked by the vendors appears to be reasonable.

Question 29

Which of the following terms best describes the amount of funds needed above the estimate to reduce the risk of overruns?

A) reserve
B) insurance funds
C) project padding
D) discretionary funds

Question 30

Projects often include indirect costs that are not associated directly with one specific project. Which of the following items are most typically considered to be indirect costs?

A) costs associated with material and purchased parts
B) the cost of labor provided by project team members, consultants and subcontractors
C) executive salaries, utilities and insurance
D) travel cost for the project team

Question 31

Figure 9-1 Time-phased budget
Consider the time-phased budget presented in Figure 9-1. What is the cumulative project budget through the end of April?

A) $ 8.000
B) $20,000
C) $38,000
D) $46,000

Question 32

All of the following factors must be in place in order to develop an analogous estimate effectively EXCEPT:

A) An organization must know details behind the time value of money
B) An organization must know the proposed effort differs from the previous project.
C) An organization must have experience with the methods by which the proposed project will be performed.
D) An organization must know how much previous projects actually cost.

Question 33

All of the following are among the benefits realized as a consequence of developing a cost management plan EXCEPT:

A) It provides relevant, accurate and timely information to support intelligent and ethical decisions.
B) It documents how the business case should be created
C) It helps stakeholders to focus on schedule and performance as well as cost.
D) It provides feedback that shows how the project's success is related to business objectives.

Question 34

Activity based costing allocates indirect costs based on different types of cost drivers. Which of the following cost drivers serve as a basis of allocation when activity based costing is used?

A) number of units produced
B) direct labor hours
C) direct material costs
D) direct equipment costs

Question 35

All of the following items describe an aspect of life cycle costing EXCEPT:

A) Life cycle cost includes the cost of creating the project and using the result.
B) Many project selection decisions are made based upon life cycle cost.
C) Life cycle cost only includes the project cost from initiating through closing
D) Project managers may need to consider disposition costs to calculate total life cycle cost.

Question 36

The process of developing an approximation of the cost of the resources needed to complete project activities is known as:

A) capital budgeting.
B) estimate resources.
C) estimate cost.
D) activity resourcing.

Question 37

Which estimating technique uses a statistical relationship between historical data and other variables to calculate project costs?

A) empirical estimating
B) parametric estimating
C) grass roots estimating
D) analogous estimating

Question 38

The approved time-phased budget against which project execution is compared and deviations are measured for management control is known as:

A) a measurement baseline.
B) a cost performance baseline.
C) a control standard.
D) a control account

Question 39

A project manager needs to ensure that the cumulative amount of cash coming into the project either from internal budgeting or from customer payments meets or exceeds the demands for paying cash out.

Question 40

What type of cost is incurred when a project must be conducted faster than normal and overtime for workers and rapid delivery charges are necessary?

A) marginal costs
B) expedited costs
C) nonrecurring costs
D) variable costs.

Question 41

A milestone is a typical measuring point used when establishing cost control. Which of the following accurately describes the use of cost control milestones?

A) Project managers can use their cash flow projections to determine the funding needed to reach each milestone.
B) Project managers and sponsors often decide the number of milestones jointly.
C) Milestones are often identified in the project charter.
D) all of these

Question 42

Describe the most common cost elements to be included in a project cost estimate.

Question 43

"Unknown unknowns" is a term used to describe events which occur that are totally unexpected. All of the following accurately describe an implication associated with unknown unknowns EXCEPT:

A) They are usually discovered during risk identification
B) They need to be covered in the project budget.
C) They usually require the use of management reserve.
D) They usually cause an increase in cost and / or schedule.

Question 44

Events discovered during Identify Risks that may or may not occur are often categorized as:

A) known knowns
B) known unknowns
C) unknown unknowns
D) known certainties

Question 45

Compare and contrast the advantages and disadvantages of analogous,parametric and bottom-up estimating.

Question 46

Describe the general approach you would employ to develop a time-phased budget for a project.

Question 47

Describe several sources of uncertainty in estimating the cost of a project as well as strategies you can employ to address uncertainty.