Chp 7

Question 1

Overrun is the additional percentage amount by which estimates exceed actual costs.

Answer 1

False;

Actual Costs exceed actual costs

Question 2

The primary output of the planning cost management process is a change request

Answer 2

False;

Cost Management Plan not a change request

Question 3

IT project managers must be able to present and discuss project information both in financial and technical terms.

Answer 3

True

Question 4

Project managers must conduct cash flow analysis to determine net present value

Answer 4

True

Question 5

Intangible costs can be easily measured in monetary terms.

Answer 5

False;

difficult to measure

Question 6

When deciding what projects to invest in or continue, one should include sunk costs.

Answer 6

False;

Should not include sunk costs

Question 7

It is important for project managers to focus on indirect costs because they can be easily controlled.

Answer 7

False;

DIRECT not indirect

Question 8

If an important supplier goes out of business, management reserves can be set aside to cover the resulting costs.

Answer 8

True

Question 9

Contingency reserves are also known as unknown unknowns.

Answer 9

False;

known Unknowns

Question 10

A cost management plan can include organizational procedures links, control thresholds, and process descriptions.

Answer 10

True

Question 11

A budgetary estimate is the most accurate of the three types of estimates.

Answer 11

False;

Definitive estimate

Question 12

Budgetary estimates are made even before a project is officially started.

Answer 12

False;

1-2 years prior to completion

Question 13

Definitive estimates are made one year or less prior to project completion

Answer 13

True

Question 14

Estimates should become more accurate as time progresses

Answer 14

True

Question 15

Supporting details for an estimate include the ground rules and assumptions used in creating the estimate.

Answer 15

True

Question 16

Analogous estimates are called activity-based costing.

Answer 16

False;

top-down estimates

Question 17

Analogous estimates are the most accurate technique to estimate costs

Answer 17

False;

less accurate

Question 18

In a bottom-up estimate, the size of the individual work items is one of the factors that drives the accuracy of the estimates.

Answer 18

True

Question 19

Parametric models are reliable when the models are flexible in terms of the project’s size.

Answer 19

True

Question 20

One of the reasons why project cost estimates are inaccurate is because human beings are biased toward underestimation.

Answer 20

True

Question 21

It is important for project managers to understand that every cost estimate is unique

Answer 21

True

Question 22

Determining the budget involves allocating the project cost estimate to individual work items over time.

Answer 22

True

Question 23

The project management plan and project funding requirements are inputs of the process of controlling costs.

Answer 23

True

Question 24

The formulas for variances and indexes start with EV, the earned value.

Answer 24

True

Question 25

If cost variance is a positive number, it means that performing the work costs more than planned.

Answer 25

False; | work costs less than planned

Question 26

A negative schedule variance means that it took lesser than planned to perform the work.

Answer 26

False; | lesser, not longer

Question 27

If the cost performance index (CPI) is less than 100 percent, the project is under budget.

Answer 27

False; | Over not under

Question 28

A schedule performance index of one means that the project is on schedule.

Answer 28

True

Question 29

In an earned value chart, when the actual cost line is right on or above the earned value line, it indicates that costs are less than planned.

Answer 29

False; | costs are equal to or more than

Question 30

Spreadsheets are a common tool for cost estimating, cost budgeting, and cost control.

Answer 30

True

Question 31

_____ includes the processes required to ensure that a project team completes a project within an approved budget.

Answer 31

Project cost management

Question 32

Which of the following involves developing an approximation of the costs of resources needed to complete a project?

Answer 32

Estimating costs

Question 33

_____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

Answer 33

Determining the budget

Question 34

One of the main outputs of the _____ process is a cost baseline.

Answer 34

cost budgeting

Question 35

The process of controlling costs primarily involves:

Answer 35

managing changes to the project budget.

Question 36

Work performance information and cost forecasts are main outputs of the _____ process.

Answer 36

cost control

Question 37

Profits may be defined as:

Answer 37

revenues minus expenditures.

Question 38

_____ helps develop an accurate projection of a project’s financial expenses and benefits.

Answer 38

Life cycle costing

Question 39

_____ is a method for determining the estimated annual costs and benefits for a project.

Answer 39

Cash flow analysis

Question 40

Which of the following is true of tangible costs?

Answer 40

They can be easily measured.

Question 41

_____ are those costs that are difficult to measure in monetary terms.

Answer 41

Intangible costs

Question 42

Newtech Inc. hires John for the position of a software programmer to work on their new project. Salary paid to John by Newtech Inc. would be an example of _____ costs.

Answer 42

direct

Question 43

Indirect costs are:

Answer 43

not directly related to the products or services of a project.

Question 44

Soles is a footwear company which has recently set up its store in Ambrosia. To manufacture its products, Soles incurs a range of different costs. Which of the following would be an example of an indirect cost?

Answer 44

Electricity used to run its factories

Question 45

Good Earth, a company manufacturing packaged food products, sets up its stores in Baltonia. However, a year later, the company closes the store down due to high operating costs. In such a scenario, the money spent in paying for the rent of the store in Baltonia would be an example of _____ costs.

Answer 45

sunk

Question 46

Which of the following is true of contingency reserves?

Answer 46

They allow for future situations that can be partially planned for.

Question 47

Which of the following reserves allows for future situations that are unpredictable?

Answer 47

Management reserves

Question 48

The first step in project cost management is:

Answer 48

to plan how costs will be managed.

Question 49

Which of the following is true of a rough order of magnitude estimate?

Answer 49

It provides an estimate of what a project will cost.

Question 50

A rough order of magnitude estimate can be referred to as a _____ estimate.

Answer 50

ballpark

Question 51

A cost estimation tool which is used to allocate money into an organization’s budget is known as a _____ estimate

Answer 51

budgetary

Question 52

A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs.

Answer 52

definitive

Question 53

Which of the following types of estimate use the actual cost of a previous, similar project as the basis for estimating the cost of the current project?

Answer 53

Analogous estimates

Question 54

Analogous estimates are also known as _____ estimates.

Answer 54

top-down

Question 55

Which of the following is true of analogous estimates?

Answer 55

They are most reliable when previous projects are similar in fact with current projects.

Question 56

A cost estimation tool which involves estimating individual work items or activities and summing them to get a project total is known as a(n) _____ estimate.

Answer 56

bottom-up

Question 57

Which of the following is true of bottom-up estimates?

Answer 57

They are time-intensive and expensive to develop.

Question 58

_____ uses project characteristics in a mathematical model to estimate project costs.

Answer 58

Parametric estimating

Question 59

Which of the following is most likely to be a reason for inaccuracies in information technology cost estimates?

Answer 59

People lack estimating experience.

Question 60

If the cost estimate for a project is a basis for contract awards and performance reporting, it should be a(n) _____ estimate and as accurate as possible.

Answer 60

definitive

Question 61

The main goal of the _____ process is to produce a cost baseline for measuring project performance and project funding requirements.

Answer 61

cost budgeting

Question 62

Which of the following is an output of the process of controlling costs?

Answer 62

Cost forecasts

Question 63

Which of the following is an input of the process of controlling costs?

Answer 63

Work performance data

Question 64

The budget is one of the three values of earned value management and is also known as _____.

Answer 64

planned value

Question 65

Which of the following is true of earned value?

Answer 65

It is an estimate of the value of the physical work actually completed.

Question 66

Variances are calculated by subtracting the actual cost from _____.

Answer 66

earned value

Question 67

Cost variance is:

Answer 67

the earned value minus the actual cost.

Question 68

Schedule variance is:

Answer 68

the earned value minus the planned value.

Question 69

The cost performance index (CPI):

Answer 69

can be used to estimate the projected cost of completing the project.

Question 70

Which of the following is true of the schedule performance index (SPI)?

Answer 70

It can be used to estimate the projected time to complete the project.

Question 71

Earned Value (EV)

Answer 71

EV =PV to date * RatePerformance

Question 72

Cost Variance (CV)

Answer 72

CV = EV - ActualCost

Question 73

Schedule Variance (SV)

Answer 73

SV = EV - PlannedValue

Question 74

Cost Performance Index (CPI)

Answer 74

CPI = EV / ActualCost

Question 75

Schedule Performance Index (SPI)

Answer 75

SPI = EV / PlannedValue

Question 76

Estimate at Completion (EAC)

Answer 76

EAC = BudgetAtCompletion / CPI

Question 77

Estimated time to complete

Answer 77

Original time Estimate / SPI