ch7: project cost mgmt

Which of the following is an OUTPUT of the process of controlling costs? a. Cost forecasts b. Project funding requirements c. Basis of estimates d. Scope baselines

a. Cost forecasts

____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance. a. Determining the budget b. Finalising policies for project costs c. Controlling costs d. Estimating costs

a. Determining the budget

_____ are those costs that are difficult to measure in monetary terms. a. Intangible costs b. Direct costs c. Tangible costs d. Fixed costs

a. Intangible costs

Which of the following is true of the schedule performance index (SPI)? a. It can be used to estimate the projected time to complete the project. b. It means that a project is behind schedule if an SPI is greater than one. c. It means that a project is ahead of schedule if SPI is lesser than one or hundred percent. d. It is the ratio of planned value to actual costs.

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

Which of the following is true of contingency reserves? a. They allow for future situations that can be partially planned for. b. They are also known as unknown unknowns. c. They are not included in a cost baseline. d. They allow for dollar amounts

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

A cost estimation tool which is used to allocate money into an organization's budget is known as a _____ estimate. a. budgetary b. definitive c. rough order of magnitude d. ballpark

a. budgetary

The main goal of the _____ process is to produce a cost baseline for measuring project performance and project funding requirements. a. cost budgeting b. cost planning c. cost controlling d. cost estimating

a. cost budgeting

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. a. direct b. indirect c. sunk d. intangible

a. direct

Variances are calculated by subtracting the actual cost from _____. a. earned value b. schedule variance c. planned value d. rate of performance

a. earned value

Schedule variance is: a. the earned value minus the planned value. b. the earned value minus the actual cost. c. the planned value plus the earned value. d. the planned value plus the rate of performance.

a. the earned value minus the planned value.

_____ is a method for determining the estimated annual costs and benefits for a project. a. Critical path analysis b. Cash flow analysis c. Present value analysis d. Requirements analysis

b. Cash flow analysis

Which of the following is true of a rough order of magnitude estimate? a. It is used to allocate money into an organization's budget. b. It provides an estimate of what a project will cost. c. Its timeframe is always less than a year prior to project completion. d. It is a type of estimate that is done in the final stages of a project.

b. It provides an estimate of what a project will cost.

Which of the following reserves allows for future situations that are unpredictable? a. Contingency reserves b. Management reserves c. Known unknowns d. Cost baseline reserves

b. Management reserves

_____ uses project characteristics in a mathematical model to estimate project costs. a. Rough order of magnitude estimating b. Parametric estimating c. Bottom-up estimating d. Analogous estimating

b. Parametric estimating

Which of the following is most likely to be a reason for inaccuracies in information technology cost estimates? a. Estimates take a long time to be worked out.. b. People lack estimating experience. c. Human beings are biased toward overestimation d. Only software development provides the scope for estimates to be accurate.

b. People lack estimating experience.

Which of the following is true of tangible costs? a. They cannot be calculated in monetary terms. b. They can be easily measured. c. They are difficult to quantify. d. Their examples include goodwill and prestige.

b. They can be easily measured

Which of the following is an INPUT of the process of controlling costs? a. Cost forecasts b. Work performance data c. Change requests d. Scope baseline

b. Work performance data

The cost performance index (CPI): a. indicates that a project is under budget if CPI is less than one. b. can be used to estimate the projected cost of completing the project. c. indicates that the planned and actual costs are equal if CPI is more than one. d. is the ratio of earned value to planned value.

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

A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs. a. budgetary b. definitive c. rough order of magnitude d. final

b. definitive

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. a. budgetary b. definitive c. rough order of magnitude d. analogous

b. definitive

The process of controlling costs primarily involves: a. determining the policies for project costs. b. managing changes to the project budget. c. finalising the procedures for project costs. d. determining a basis for estimates.

b. managing changes to the project budget.

Cost variance is: a. the planned value plus actual costs. b. the earned value minus the actual cost. c. the rate of performance minus earned value. d. the planned value minus the rate of performance.

b. the earned value minus the actual cost.

The first step in project cost management is: a. to allocate project cost estimates to individual material resources. b. to plan how costs will be managed. c. to control project costs and monitor cost performance. d. to develop several estimates

b. to plan how costs will be managed.

Analogous estimates are also known as _____ estimates. a. bottom-up b. top-down c. parametric d. budgetary

b. top-down

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? a. Cost of machines to produce shoes b. Salary paid to factory workers c. Electricity used to run its factories d. Cost of leather used to manufacture shoes

c. Electricity used to run its factories

Which of the following is true of earned value? a. It is the actual cost plus the planned cost. b. It is based solely on the total cost estimate to be spent on an activity. c. It is an estimate of the value of the physical work actually completed. d. It is also known as the planned value.

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

_____ helps develop an accurate projection of a project's financial expenses and benefits. a. Critical path analysis b. Fast tracking c. Life cycle costing d. Crashing

c. Life cycle costing

Which of the following is true of analogous estimates? a. Their main disadvantage is that they cost more than other techniques. b. They are the only technique which do not require expert judgement. c. They are most reliable when previous projects are similar in fact with current projects. d. They use project characteristics in a mathematical model to estimate project costs.

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

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. a. budgetary b. parametric c. bottom-up d. analogous

c. bottom-up

One of the main outputs of the _____ process is a cost baseline. a. cost controlling b. cost estimating c. cost budgeting d. cost planning

c. cost budgeting

Work performance information and cost forecasts are main outputs of the _____ process. a. cost budgeting b. cost estimating c. cost control d. cost pricing

c. cost control

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. a. recurring b. direct c. sunk d. intangible

c. sunk

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? a. Definitive estimates b. Parametric estimates c. Bottom-up estimates d. Analogous estimates

d. Analogous estimates

Which of the following involves developing an approximation of the costs of resources needed to complete a project? a. Determining the budget b. Finalising the cost baseline c. Controlling costs d. Estimating costs

d. Estimating costs

_____ includes the processes required to ensure that a project team completes a project within an approved budget. a. Project scope management b. Project quality management c. Project time management d. Project cost management

d. Project cost management

Which of the following is true of bottom-up estimates? a. They are based on the actual cost of a previous, similar project. b. They are also known as parametric estimating. c. They are most accurate when they involve large, extensive work items. d. They are time-intensive and expensive to develop.

d. They are time-intensive and expensive to develop.

A rough order of magnitude estimate can be referred to as a _____ estimate. a. definitive b. budgetary c. final d. ballpark

d. ballpark

Indirect costs are: a. directly related to performing the project. b. those that cannot be allocated to projects. c. those that can be easily controlled by managers. d. not directly related to the products or services of a project.

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

The budget is one of the three values of earned value management and is also known as _____. a. earned value b. actual cost c. indirect cost d. planned value

d. planned value

Profits may be defined as: a. expenses plus net income b. costs plus revenues. . c. revenues plus expenses. d. revenues minus expenditures.

d. revenues minus expenditures.