Deck 10: Budgeting Projects

Question 1

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

Answer 1

True

Question 2

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.

Answer 2

True

Question 3

On agile projects,project managers may use rolling wave planning to estimate costs.

Answer 3

True

Question 4

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 5

Regardless of what method is used to estimate project costs,supporting detail should be provided.

Question 6

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

Question 7

Project managers should not lie to themselves or others regarding project costs.

Question 8

Estimate Cost is the process of developing an approximation of the monetary resources needed to complete project activities.

Question 9

Plan Cost Management is the process to determine how to plan,estimate,and control project costs.

Question 10

Typically,expedited costs are preferred over regular costs.

Question 11

A contingency reserve is money assigned to the project and allocated for identified risks for which contingent responses are developed.

Question 12

On small projects,the cost management plan may be as simple as ensuring accurate estimates are made,securing the funding,and developing cost reporting procedures to ensure that the money is spent correctly.

Question 13

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

Question 14

The component of the project management plan that describes how project costs will be planned,structured and controlled is called the project financial plan.

Question 15

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 16

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

Question 17

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

Question 18

Fixed costs remain the same regardless of the size or volume of work,while variable costs vary directly with volume of use.

Question 19

The project scope does not come into play when considering fixed and variable cost choices.

Question 20

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

Question 21

The _________is the approved budget,usually in a time distribution format,that is used to estimate,monitor,and control the overall cost performance of the project.

A) management baseline. 
B) cost baseline. 
C) cost benchmark 
D) control account

Question 22

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

A) determine budget. 
B) estimate resources. 
C) estimate cost. 
D) estimate activities.

Question 23

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) Normal cause variation is when something out of the ordinary occurs

Question 24

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 and a range of possible outcomes. 
D) assumptions and constraints.

Question 25

Which estimating technique uses a statistical relationship to calculate cost or duration based on historical data and other project parameters?​ 

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

Question 26

Value engineering is aimed at increasing the value or productivity of a work element while minimizing the cost.

Question 27

Projects often include indirect costs that are necessary to keep the organization running,but are not associated 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 28

Which estimating technique decomposes the work into lower,more detailed pieces,preferably the lowest level of WBS work elements,for which estimates are prepared and then aggregates them into a total quantity for the project?​ 

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

Question 29

Which estimating technique uses a statistical relationship between historical data and other variables (e.g.,square footage in construction,lines of code in software development)to calculate an estimate for scope,cost and duration? 

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

Question 30

Costs that repeat as project work continues such as the cost of writing code or laying bricks are appropriately classified as:​ 

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

Question 31

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 how and to what extent the proposed project differs from the previous project. 
C) An organization must have experience in performing similar projects. 
D) An organization must know how much previous projects actually cost.

Question 32

Activity based costing allocates overhead (indirect costs)to fixed costs based upon four different types of drivers.Which of the following is one of the cost drivers that serves as a basis of cost allocation?​ 

A) number of units produced 
B) number of labor hours 
C) quantity of materials used 
D) direct equipment costs

Question 33

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

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

Question 34

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

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

Question 35

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

Question 36

The cost management plan provides guidelines to the project manager and other stakeholders and serves all of the following purposes EXCEPT:​ 

A) It shows how to develop and share relevant, accurate and timely information on cost that the project manager, sponsor and other stakeholders can use to make intelligent and ethical decisions. 
B) It documents how the project statement of work and business case should be created. 
C) It helps all project stakeholders focus appropriately on schedule and cost performance. 
D) It provides feedback, thereby showing how the project's success is linked to the business objectives for which it was undertaken.

Question 37

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 38

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 39

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

A) Life cycle cost includes the cost of both creating the project and of using the result of the project during its useful life. 
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 disposal costs of the product after its useful life is complete to calculate total life cycle cost.

Question 40

Which of the following terms best describes extra money in the project budget to be used if necessary - usually if a risk event occurs? 

A) reserve 
B) insurance 
C) padding 
D) discretionary fund

Question 41

Discuss how the accuracy of cost estimates becomes more precise during a project.

Question 42

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

Question 43

A milestone is a typical measuring point used when establishing cost control.Which of the following does NOT 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) Milestones are developed during risk planning.

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

Describe analogous,parametric and bottom-up estimating,and briefly discuss the advantages and disadvantages of each method.

Question 46

"Unknown unknowns" are unexpected events which can occur when the project is underway.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.