Deck 7: Determining Costs, Budget and Earned Value

Question 1

Historical data can be used as a guide on the current project.

Answer 1

True

Question 2

The key to effective cost control is waiting to address negative cost variances and cost inefficiencies after they are identified.

Answer 2

False

Question 3

The percentage complete estimate for a work package is subjective and requires an underestimated guess compared to the scope of the work package.

Answer 3

False

Question 4

Committed costs are also known as discharged or postponed costs.

Question 5

If you put off corrective actions until some point in the distant future, the negative cost variance may deteriorate in the project.

Question 6

Materials costs in the project costs estimate are the estimated costs of materials that the project team or contractor

A)want to have in supply in the office.
B)needs even if not for this particular project.
C)needs to purchase for the project.
D)might want to use on the project.

Question 7

In many cases, there will be a trade-off; reducing cost variances will involve a reduction in project scope or a delay in the project schedule.

Question 8

Cost estimates should be unreasonable and excessive.

Question 9

The key to effective cost control is to analyse cost performance on a regular and timely basis.

Question 10

It is important to manage the cash flow on a project.

Question 11

Labour costs in the project costs estimate are the estimated costs for the various types or classifications of and are based on the estimated work time (not necessarily the same as the activity estimated duration) and the Rand labour rate for each.

A)people who are expected to work on the project
B)people, even if they are not directly assigned to the project
C)overhead and direct expenses
D)subcontractors

Question 12

The key to managing cash flow is to ensure that cash comes in faster than it goes out.

Question 13

It is good practice to have the person who will be responsible for the costs associated with the work make the cost estimates.

Question 14

The worst scenario from the contractor's point of view is to have the customer make only one payment at the end of the project.

Question 15

Equipment costs in the project costs estimate are for equipment

A)that the organisation wants to have.
B)that is the latest upgrade, even if not needed for the project.
C)that must be purchased as part of the project.
D)needed by others in the organisation that may not be assigned to the project.

Question 16

Based on analysis of actual cost it is possible to forecast what the total costs will be at the completion of the project or work package.

Question 17

In many projects, large Rand amounts are expended for materials or services (subcontractors, consultants) that are used over a period of time longer than one cost reporting period.

Question 18

The total project cost is often estimated during the phase of the project or when the project charter or a proposal is prepared

A)initiating
B)planning
C)performing
D)closing

Question 19

When the CPI goes below 1.0 or gradually gets smaller, corrective action should not be taken; the project is performing well.

Question 20

Cumulative actual cost (CAC) should be calculated to compare to the cumulative budgeted cost (CBC).

Question 21

Costs related to are for outsourced work when the project teams or contractors do not have the expertise or resources to do certain project tasks.

A)benefactors and suppliers
B)stakeholders
C)reserve and withholding
D)subcontractors and consultants

Question 22

Facilities costs in the project costs estimate are for

A)general facilities for the project organisation.
B)special facilities or additional space for the project team.
C)special facilities or additional space for the organisation where other projects will be in progress.
D)storage of materials even if not for the project.

Question 23

Committed costs need to be treated in a special way so that the system

A)audits the amounts assigned.
B)periodically assigns a portion of their total cost to actual cost.
C)enters the amount of the cost one time at the end of the project.
D)enters the amount of the cost one time at the beginning of the project.

Question 24

There are two approaches to establishing the total budgeted cost for each work package:

A)top-down and bottom-up.
B)horizontal and vertical.
C)committed and actual.
D)aggregated and disaggregated.

Question 25

Travel costs in the project costs estimate are for

A)travel (other than local travel) required during the project.
B)all travel by the organisation.
C)travel costs for local meetings.
D)travel for conferences that may not be related to the project.

Question 26

It is important to use the as the standard against which actual cost is compared.

A)cumulative budget
B)total budget
C)budget at completion
D)phased budget

Question 27

To keep track of , it's necessary to set up a system to collect, on a regular and timely basis, data on funds actually expended.

A)budgeted cost of work scheduled
B)planned cost of the project
C)actual cost on a project
D)budgeted cost of work performed

Question 28

The budget for each work package is

A)charged completely on the first day of the work package.
B)charged at the end of the project.
C)distributed over the duration of the work package.
D)charged completely on the last day of the work package.

Question 29

Once a total budgeted cost has been established for each work package, the second step in the project budgeting process is to

A)assign each TBC at the start of its work package.
B)assign each TBC at the end of its work package.
C)distribute each TBC over the project by dividing the total by the number of work packages and assigning that amount to each.
D)distribute each TBC over the duration of its work package.

Question 30

The is the amount that was budgeted to achieve the work that was scheduled to be performed up to that point in time.

A)total budgeted cost (TBC)
B)cumulative actual cost (CAC)
C)cumulative budgeted cost (CBC)
D)cumulative earned value (CEV)

Question 31

Large projects would have charge codes for the work package numbers to

A)have a place for other projects to charge expenses.
B)determine how the actual costs compare to the planned costs.
C)have resources be able to determine what tasks they should complete.
D)allow for cutting of the budget for the activities if need to cut the budget.

Question 32

A cost is determined for each period, based on when the activities that make up the work package are scheduled to be performed, to create

A)the time-phased budget.
B)the actual costs of the project.
C)an example budget.
D)an adjusted budget.

Question 33

Allocating total project costs for the various elements to the appropriate work packages will establish

A)the committed costs for the work package.
B)the anticipated expense for the work package.
C)how to apply resources to the work package.
D)a total budgeted cost (TBC) for each work package.

Question 34

Contingency costs in the project costs estimate, also referred to as , are to cover unexpected situations that may come up during the project, such as items that may have been overlooked when the initial project scope was defined, activities that may have to be redone because they may not work the first time (redesigns), or a high probability or high impact risk that may occur.

A)auxiliary funds
B)withholding
C)reserves
D)capital funds

Question 35

The project cost estimate is allocated to

A)the various work packages in the project work breakdown structure.
B)the resources in the project.
C)the committed costs in the project.
D)the stakeholders.

Question 36

It may be easier to estimate the costs for , but as the project progresses, the project team can progressively elaborate the estimated costs as more information is known or becomes clear to allow for more accurate estimated costs.

A)near-term activities
B)activities near the end of the project
C)new activities with new procedures
D)activities with long durations

Question 37

Often, the sum of the initial estimated costs is greater than the amount of funds budgeted by the sponsor.What should be done to arrive at an acceptable budget amount?

A)Cut the cost of the highest priced activity in half until the budget is reached.
B)Trade experienced and efficient resources for less experienced and less efficient resources.
C)Revise the budget, expecting that several iterations may need to be made to reduce the costs.
D)Extend the scope of the project.

Question 38

At the beginning of the project, it may not be possible to estimate the costs for all activities with a level of confidence regarding their accuracy.This is especially true for

A)projects with a short term.
B)longer-term projects.
C)projects that are similar to ones completed by the organisation before.
D)projects with activities that are serially related.

Question 39

The for the entire project or each work package provides a baseline against which actual cost and work performance can be compared at any time during the project.

A)total budgeted cost (TBC)
B)cumulative budgeted cost (CBC)
C)cumulative earned value (CEV)
D)cumulative actual cost (CAC)

Question 40

When the budgets for all the work packages are summed,

A)they should exceed the amount of funds available.
B)they cannot exceed the total project budgeted cost.
C)if the total is too high then the amounts should be force-fitted into the customer's budget.
D)if the total is too low then extra non-project expenses should be added.

Question 41

The is the amount that was actually spent to achieve the work that was scheduled to be performed up to that point in time.

A)total budgeted cost (TBC)
B)cumulative budgeted cost (CBC)
C)cumulative actual cost (CAC)
D)cumulative earned value (CEV)

Question 42

Consider a project that involves painting five similar houses over ten weeks (one house every two weeks) for a total budgeted cost of R200 000.The budget is R4 0000 per house.At of the end of week 5, you determine that R100 000 has actually been spent and three houses have been painted completely.What is the earned value of the project?

A)R100 000
B)R120 000
C)R40 000
D)R200 000

Question 43

As data are collected on , including portions of any committed cost, they need to be totaled by work package so that they can be compared to the

A)planned cost; total budgeted cost.
B)budgeted cost of work scheduled; actual cost of work performed.
C)actual cost; cumulative budgeted cost.
D)cumulative earned value; total budgeted cost.

Question 44

The cost performance index (CPI) is a measure of the cost efficiency with which the project is being performed.If the cumulative earned value is greater than the cumulative actual costs, then

A)the CPI is greater than 1.0.
B)the CPI is less than 1.0.
C)CPI cannot be determined with CEV and CAC.
D)the CPI is negative.

Question 45

Another indicator of cost performance is cost variance (CV).If the cumulative earned value is greater than the cumulative actual costs, then

A)the CV is positive.
B)the CV is equal to the TBC.
C)CV cannot be determined with CEV and CAC.
D)the CV is negative.

Question 46

Costs are when an item is ordered even though actual payment may take place at some later time.

A)discharged
B)committed
C)postponed
D)restrained

Question 47

Determining the earned value involves collecting data on the percentage complete for each work package and then converting this percentage to a Rand amount by multiplying the_____ of the work package by the percentage complete.

A)total budgeted cost (TBC)
B)cumulative budgeted cost (CBC)
C)cumulative earned value (CEV)
D)cumulative actual cost (CAC)

Question 48

The is the product of the percentage completed and the sum of the estimated costs of all the specific activities that make up a work package or the project.

A)total budgeted cost (TBC)
B)cumulative budgeted cost (CBC)
C)cumulative actual cost (CAC)
D)cumulative earned value (CEV)

Question 49

It's important that the person estimating the percentage complete not only assess how much work has been performed but also consider

A)what work should have been done.
B)what work remains to be done.
C)what work others have to do on other projects.
D)the cost of the work.

Question 50

A second method for determining the forecasted cost at completion assumes that, regardless of the efficiency rate the project or work package has experienced in the past, the work to be performed on the remaining portion of the project or work package will be done according to budget.If the cumulative actual cost is greater than the cumulative earned value, then

A)the FCAC is greater than the TBC.
B)the FCAC is less than the TBC.
C)the FCAC cannot be calculated with the values given.
D)additional information is needed to predict the FCAC.

Question 51

Calculate the forecasted cost at completion if the total budgeted cost is R150 000, the cumulative actual cost is R100 000, and the cumulative earned value is R120 000.

A)FCAC = R70 000
B)FCAC = R170 000
C)FCAC = R130 000
D)FCAC = R370 000

Question 52

Calculate the forecasted cost at completion if the total budgeted cost = R100 000, the CEV is R80 000, and the CAC is R40 000.

A)FCAC = R50 000
B)FCAC = R200 000
C)FCAC = R60 000
D)FCAC = R40 000

Question 53

The is the sum of the estimated costs of all the specific activities that make up a work package or the project.

A)total budgeted cost (TBC)
B)cumulative budgeted cost (CBC)
C)cumulative actual cost (CAC)
D)cumulative earned value (CEV)

Question 54

Calculate the cost variance if the cumulative earned value is R10 and the cumulative actual costs are R20.

A)R10
B)-R10
C)0.5
D)2.0

Question 55

A third method for determining the forecasted cost at completion is to re-estimate the costs for all the remaining work to be performed and then add this re-estimate to the cumulative actual cost.If the amount of cumulated actual costs is less than difference between the total budgeted cost and the re-estimate, then

A)the FCAC is greater than the TBC.
B)the FCAC is less than the TBC.
C)the FCAC cannot be calculated with the values given.
D)additional information is needed to predict the FCAC.

Question 56

Earned value, the value of , is a key parameter that must be determined throughout the project.

A)the work scheduled
B)the resources used
C)the resources assigned
D)the work actually performed

Question 57

Plot curves on the same graph to reveal any trends toward improving or deteriorating cost performance.

A)AC, TBC, EV
B)actual cost and budgeted cost
C)CBC, CAC, and CEV
D)CBC, PV, and BCWS

Question 58

If the cumulative earned value is R10 and the cumulative actual costs are R20, then the CPI is

A)R10.
B)-R10.
C)0.5.
D)2.0.

Question 59

The is the amount that was budgeted to achieve the work that was scheduled to be performed up to that point in time.

A)total budgeted cost (TBC)
B)cumulative budgeted cost (CBC)
C)cumulative actual cost (CAC)
D)cumulative earned value (CEV)

Question 60

A method for calculating the forecasted cost at completion assumes that the work to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far.If the cost performance index is greater than 1.0, then

A)the FCAC is greater than the TBC.
B)the FCAC is less than the TBC.
C)the FCAC cannot be calculated with CPI.
D)additional information is needed to predict the FCAC.

Question 61

When evaluating work packages that have a negative cost variance, you should focus on taking corrective actions to reduce the costs of:

A)activities that have a small cost estimate.
B)activities that have a moderate cost estimate.
C)activities that have a large cost estimate.
D)all the activities in the project.

Question 62

It's crucial that cost variances and inefficiencies be identified early so that

A)corrective action can be taken before the situation gets worse.
B)negotiations can take place for the contract.
C)the project can be monitored for self-correction.
D)time is not applied to the project.

Question 63

The contractor might try to negotiate payment terms that require the customer to do one or more of the following except

A)provide frequent payments, such as weekly or monthly payments rather than quarterly payments.
B)make equal monthly payments based on the expected duration of the project.
C)make a single payment at the end of the project.
D)provide a down payment at the start of the project.

Question 64

The contractor's outflow of cash can be controlled by

A)paying a bill as soon as it is received.
B)delaying payment until cash is received to pay the bill.
C)delaying payment until it is due.
D)never paying bills.

Question 65

Managing cash flow involves making sure that sufficient payments are received from the customer in time so that

A)you have enough money to cover the costs of performing the project.
B)you hold a reserve of funds instead of paying bills.
C)payroll can be paid and suppliers are delayed indefinitely.
D)deposits can be made in several different accounts.

Question 66

When evaluating work packages that have a negative cost variance, you should focus on taking corrective actions to reduce the costs of:

A)activities that will be performed in the near term.
B)activities that will be performed towards the end of the project.
C)activities that will be performed at the end of the project.
D)all the activities in the project.

Question 67

Calculate the forecasted cost at completion if the cumulative actual cost is R100 000 and the re-estimate of remaining work to be performed is R50 000.

A)FCAC = R50 000
B)FCAC = R150 000
C)FCAC = 2
D)FCAC = 0.5

Question 68

involves the following: analysing cost performance to determine which work packages may require corrective action; deciding what specific corrective action should be taken; and revising the project plan, including time and cost estimates, to incorporate the planned corrective action.

A)Resource analysis
B)CPI monitoring
C)Cost control
D)Problem solving

Question 69

Which of the following is not a way to reduce the costs of activities:

A)Reduce the scope or requirements
B)Substitute less expensive materials.
C)Assign a person with less expertise or less experience to perform or help with the activity.
D)Increase productivity through improved methods or technology.