Chapter 7

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 c. Bottom-up estimates b. Parametric estimates d. Analogous estimates

Analogous estimates

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

Electricity used to run its factories

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

Estimating costs

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. c. Its timeframe is always less than a year prior to project completion. b. It provides an estimate of what a project will cost. d. It is a type of estimate that is done in the final stages of a project.

It provides an estimate of what a project will cost.

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

Cash flow analysis

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

Cost forecasts

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

Determining the budget

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

Intangible costs

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

Life cycle costing

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

Management reserves

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

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. c. Human beings are biased toward overestimation. b. People lack estimating experience. d. Only software development provides the scope for estimates to be accurate.

People lack estimating experience.

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

Project cost management

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

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

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

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

Work performance data

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

ballpark

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 c. bottom-up b. parametric d. analogous

bottom-up

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

budgetary

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

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

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

cost budgeting

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

cost budgeting

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

cost control

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

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

definitive

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 c. sunk b. indirect d. intangible

direct

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

earned value

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

managing changes to the project budget.

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

revenues minus expenditures.

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 c. sunk b. direct d. intangible

sunk

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

the earned value minus the actual cost.

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

the earned value minus the planned value.

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

to plan how costs will be managed.

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

top-down

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

They are time-intensive and expensive to develop.

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

They can be easily measured.

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. c. It means that a project is ahead of schedule if SPI is lesser than one or hundred percent. b. It means that a project is behind schedule if an SPI is greater than one. d. It is the ratio of planned value to actual costs.

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

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

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

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

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 c. indirect cost b. actual cost d. planned value

planned value