Chapter 7 Quiz

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

False

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

False

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

False

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

True

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

False

Analogous estimates are called activity-based costing.

False

Which type of estimate uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project?

Analogous estimates

What is a rough order of magnitude estimate also referred to as?

Ballpark

Which method is used for determining the estimated annual costs and benefits for a project?

Cash flow analysis

The main goal of which process is to produce a cost baseline for measuring project performance and project funding requirements?

Cost budgeting

Work performance information and cost forecasts are main outputs of which process?

Cost control

What type of estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs?

Definitive

Which process involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance?

Determining the budget

Which statement best defines cost variance?

Earned value minus the actual cost

What is the purpose of a cost performance index (CPI)?

Estimate the ratio of earned value to planned value

Which process helps develop an accurate projection of a project's financial expenses and benefits?

Life cycle costing

Which type of estimating uses project characteristics in a mathematical model to estimate project costs?

Parametric

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

People lack estimating experience.

What is the first step in project cost management?

Plan how costs will be managed

What is another term used for budget?

Planned value

What type of management includes the processes required to ensure that a project team completes a project within an approved budget?

Project cost management

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 which costs?

Sunk

Which statement is true of contingency reserves?

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

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

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

Which statement is true of bottom-up estimates?

They are time-intensive and expensive to develop.

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

They can be easily measured.

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

True

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

True

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

True

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

True

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

True

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

True

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

True