Chapter 4

Question 1

The _ _ of the work units of a project is a key determinant for MGT in deciding whether or not to support a project

Answer 1

aggregate cost

Question 2

easier cost to define and measure

Answer 2

Tangible costs

Question 3

more difficult cost to define and measure

Answer 3

Intangible costs

Question 4

costs that are easily associated with a work unit

Answer 4

Direct costs

Question 5

costs not easily associated with a work unit or a project

Answer 5

Indirect cost

Question 6

the balance of benefits over costs of a project

Answer 6

Value of a project

Question 7

_ - how long it will take before their investment in a project results in a positive cash flow

This stresses how quickly costs of a project are recovered (It does not care about the end result)

Answer 7

Payback analysis

Question 8

the length of time that it takes for a company to recover the amount of money invested in the project

Answer 8

Payback period

Question 9

_ - based on the calculation of expected cash flow

This approach uses a rate of interest to calculate today’s value of the future cost and benefit for a project
o The rate of interest use is based on the cost of capital

Answer 9

Net present value

Question 10

o NPV = Sum… A / (1+R)^t

Answer 10

T = the year of the cash flows
A = the amount of cash flow each year
R = the discount rate

Question 11

calculated as discounted benefits minus discounted costs divided by discounted costs multiplied by 100

Answer 11

Return on Investment

Question 12

o Consistency in the approval process
o Ease of communicating selection criteria
o Rapid evaluation process
o Less politics

Answer 12

Advantages of rigid standards

Question 13

o Lack of flexibility for professional judgment

o Fewer innovative proposals by employees

Answer 13

Disadvantages of rigid standards

Question 14

Resources for obtaining estimates

Answer 14

1. Experience
2. Documentation
3. Expert Opinion

Question 15

o Can be affected by organizational culture and top MGT’s decision making style

o Individual tend to overestimate cost and time so they are giving ‘safe’ estimates

Answer 15

Experience

Question 16

o Considered a very useful source when it is relatively current and when it describes similar cases

o Free from bias and offers an advantage over estimates obtained from individuals

o However, it can quickly become dated

Answer 16

Documentation

Question 17

o Outsider expertise can provide potential benefits in the form of broader experience and reduced game-playing

o However, outsider experience may be limited because they might not have a good understanding of the organizational culture

Answer 17

Expert opinion

Question 18

o Used with higher risk projects

Answer 18

Scenario planning

Question 19

These estimates should be gathered using a bottom-up approach and should start after individual work units are determined

Answer 19

Multiple estimates

Question 20

o For each scenario (best case, worst case, etc.) an average weight is assigned

o The smaller the variance for a set of estimates is, the more specific the results

o Where there is a large divergence between estimates, it is prudent to provide for contingency resources

Answer 20

Why multiple estimates are strongly recommended

Question 21

making detailed estimates of cost and time for one or two cycles at a given time, and rough estimates are generated for subsequent cycles

Answer 21

Phase estimating

Question 22

Any _ in describing why a certain methodology is used will erode the credibility of the estimates, and those preparing the estimates, in the mind of the customer

Answer 22

secrecy

Question 23

A _ _ may become a factor when estimating time and cost for repetitive activities

Answer 23

learning curve

Question 24

Estimates must be based on _ _ and free from extreme case assumption

Answer 24

normal conditions

Question 25

An appropriate way to prepare for extreme situations is through the use of a _ _

Answer 25

contingency plan

Question 26

When necessary, contingency situations are described and _ _ are appropriated for them at the planning phase of the project development life cycle

Answer 26

contingency funds

Question 27

A _ _ of estimated times is appropriate when there is uncertainty regarding activity duration

Answer 27

risk analysis

Question 28

1. Identify possible risks 2. Predict the likelihood of risks happening 3. Estimate the potential impact of risks 4. Communicate risks to stakeholders 5. Prepare alternative responses

Answer 28

The purposes that risk analysis serves.

Question 29

Modern project management is a process of _ _, communication, and adjustment.

Answer 29

constant negotiation

Question 30

A _ _ _ or group can facilitate and encourage change proposals

Answer 30

requirements change committee

Question 31

1. Establish guidelines for submitting proposals for changes in the project 2. Develop and communicate criteria for the evaluation of proposed change 3. Evaluate and approve change 4. Ensure compliance

Answer 31

Responsibilities of the requirements change committee.

Question 32

_ _ _ _ and Critical Path Method (CPM) are the most widely-used for scheduling, monitoring, and communicating time aspects of projects

Answer 32

Program Evaluation Review technique (PERT)

Question 33

_ programs are decision tools that enable decisions makers to formulate and build a decision model and to be able to analyze results and outcome

Answer 33

Simulation

Question 34

_ _ _ integrate functions of earlier tools and are intended to analyze current situations as well as forecast future trends

Answer 34

Business intelligence software

Question 35

``` o allocate resources o monitor progress o control quality o maintain team moral o award merit o ultimately ensure project success ```

Answer 35

What cost estimates are necessary for

Question 36

from people in the organization; considers workplace culture, talent pool, inter-organizational relations, and HR policies.

Answer 36

Where to find experience (source of estimate)

Question 37

from archives of previous projects.

Answer 37

Where to find experience (documentation)

Question 38

widely used and includes a pool of internal and external experts. o Similar to experience in pros and cons. o Used for new projects where little record exists. o More formalized and expensive. o May require visits by external experts and sharing of information.

Answer 38

Where to find experience (expert opinion)

Question 39

Based on history and experience, project managers may adjust estimates given by individuals; this, in turn, may result in further adjustment (overestimation or underestimation) by those providing estimates. o This cycle creates ‘_ _’ and a non-productive environment.

Answer 39

game play

Question 40

● Use work units and bottom-up approach. ● Define clearly work units and tasks. ● Avoid memory recollection

Answer 40

Considerations for estimates

Question 41

● Obtain: The best case scenario. The most probable scenario. The worst case scenario. ● Assign weights to these estimates. ● Use average scores and variance. ● Provide contingency resources for estimates with large variance. ● Calculate ‘upper limit’ and ‘lower limit’ to measure project duration.

Answer 41

Multiple estimates

Question 42

● Sometimes, due to uncertainty, estimates are feasible for initial _ only. ● Only rough estimates of subsequent _ are initially feasible. ● Project development life cycle (initiation, planning, development, implementation, closure) can be the base for _ _. ● Project owners and sponsors must commit to a project with incomplete information about cost and time – not always an easy situation.

Answer 42

phase phases phase estimating

Question 43

● Estimates are used to request funding, make decisions, schedule, negotiate, set goals, evaluate performance, etc. ● Events happen, technology advances, priorities change, and biases creep in. ● Methods, their appropriateness, strengths, and weaknesses must be explained. ● Assume ‘normal conditions’ – free from extreme case assumptions.

Answer 43

Considerations of multiple estimates

Question 44

● For out-of-ordinary situations funds should be set aside at the planning phase of a project development life cycle. ● Documentation and communication around contingency situations is crucial. ● Such funds are not directly accessible by the project manager. ● Simply adding a margin to estimates must be avoided.

Answer 44

Contingency planning

Question 45

● Appropriate where there is uncertainty regarding activity duration. ● Leads to developing alternative responses. ● Includes prediction or likelihood of happening. ● Includes estimate of risk impact. ● Depending on the nature and size of a project, it could be more or less extensive, detailed, or formalized. ● Leads to a change management process.

Answer 45

Risk analysis

Question 46

● Change is beneficial - innovative ideas or suggestions are often made by team members. ● A _ _ committee can facilitate and encourage change proposals. ● With the approval of management, additional resources can be provided through contingency funds. ● Change may also become necessary for external reasons, such as change related to the competition, vendors, and the law

Answer 46

change management

Question 47

o Establish guidelines for change proposals o Develop and communicate criteria for the evaluation of proposed change o Evaluate and approve change o Ensure compliance

Answer 47

Responsibilities of Change Committee:

Question 48

● Changes must be consistent with the overall _ _ _ of the organization and the broad scope of the project. ● Response to change requests must be _, especially for time-sensitive changes. ● Proposals to drastically change a project may replace the project with _ _ _.

Answer 48

goals and objectives timely a new one