CTS-240 - Chapter 7
The main outputs of the _____ process are activity cost estimates, basis of estimates, and project document updates.
74. The main outputs of the _____ process are activity cost estimates, basis of estimates, and project document updates.
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?rect!
Analogous estimates
_____ is a project performance measurement technique that integrates scope, time, and cost data.
Earned value management (EVM)
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?
Electricity used to run its factories
________ are a means of measuring software size based on what the software does for end users.
Function points
Which is true of the schedule performance index (SPI)?
It can be used to estimate the projected time to complete the project.
_____ theory states that when many items are produced repetitively, the unit cost of those items decreases in a regular pattern as more units are produced.
Learning curve
_____ costing considers the total cost of ownership, or development plus support costs, for a project.
Life cycle
_____ costing helps to see a big-picture view of the cost of a project throughout its life cycle.
Life cycle
_____ uses project characteristics in a mathematical model to estimate project costs.
Parametric estimating
_____ are revenues minus expenditures.
Profits
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.
Sunk
Which of the following is true of analogous estimates?
They are most reliable when previous projects are similar in fact with current projects.
Which of the following is true of tangible costs?
They can be easily measured.
Which of the following is an input of the process of controlling costs?
Work performance data
The cost incurred for the work performed on an activity during a specific time period is known as the _____.
actual cost (AC)
A cost estimation tool which is used to allocate money into an organization's budget is known as a _____ estimate.
budgetary
Accountants define _____ as a resource sacrificed or foregone to to achieve a specific objective.
cost
A(n) _____ is a time-phased budget that project managers use to measure and monitor cost performance.
cost baseline
In addition to providing input for budgetary estimates, the process of _____ provides a cost baseline.
cost budgeting
The main outputs of the _____ process are a cost performance baseline, project funding requirements, and project document updates.
cost budgeting
In practice, many people find that using a combination or hybrid approach involving analogous, bottom up, and/or parametric modeling provides the best _____.
cost estimates
The main output of the planning cost management process is a(n) _____.
cost management plan
Variances are calculated by subtracting the actual cost from _____.
earned value
Variances are calculated by subtracting the actual cost from which value?
earned value
The _____ is the measure of work performed expressed in terms of the budget authorized for that work.
earned value (EV)
Which statement best defines cost variance?
earned value minus the actual cost
Which statement best defines schedule variance?
earned value minus the planned value
The cost performance index can be used to calculate the _____ which gives an approximate cost of completing a project based on performance to date.
estimate at completion (EAC)
What is the purpose of a cost performance index (CPI)?
estimate the projected cost of completing the project
Project managers must conduct cash flow analysis to determine _____.
net present value
The additional percentage or dollar amount by which actual costs exceed estimates is known as a(n) _____.
overrun
The budget is one of the three values of earned value management and is also known as _____.
planned value
Project costs, like project schedules, grow out of the basic documents that initiate a project, like the _____.
project charter
A cost management plan is a subsidiary of the _____ plan.
project management
A(n) _____ estimate is done very early in a project or even before a project is officially started.
rough order of magnitude (ROM)
The time frame for a(n) _____ estimate is often three or more years prior to project completion.
rough order of magnitude (ROM)
The _____ index is the ratio of earned value to planned value.
schedule performance
Cost variance is:
the earned value minus the actual cost.
If the cost performance index (CPI) is less than 100 percent, the project is under budget.
False
A rough order of magnitude estimate can be referred to as a _____ estimate.
ballpark
When deciding what projects to invest in or continue, one should include sunk costs.
False
A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs.
definitive
Which statement is true regarding indirect costs?
not directly related to the products or services of a project.
Which is an input of the process of controlling costs?
work performance data
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 type of estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs?
definitive
Which of the following is most likely to be a reason for inaccuracies in information technology cost estimates?
People lack estimating experience.
The formulas for variances and indexes start with EV, the earned value.
T
Which statement is true of contingency reserves?
They allow for future situations that can be partially planned for.
Which of the following is true of bottom-up estimates?
They are time-intensive and expensive to develop.
Which statement is true of bottom-up estimates?
They are time-intensive and expensive to develop.
Which statement is true of tangible costs?
They can be easily measured.
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.
definitive
Which type of estimate should be used if the cost estimate for a project is used a basis for contract awards and performance reporting?
definitive
Which process involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance?
determining the budget
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 reserves allow for future situations that are unpredictable?
Management reserves
Which of the following is an output of the process of controlling costs?
Cost forecasts
_____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.
Determining the budget
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 would be an example of an indirect cost?
Electricity used to run its factories
Which of the following involves developing an approximation of the costs of resources needed to complete a project?
Estimating costs
Analogous estimates are called activity-based costing.
F
A budgetary estimate is the most accurate of the three types of estimates.
False
A negative schedule variance means that it took less time than planned to perform the work.
False
Analogous estimates are called activity-based costing.
False
Analogous estimates are the most accurate technique to estimate costs.
False
Contingency reserves are also known as unknown unknowns.
False
If cost variance is a positive number, it means that performing the work costs more than planned.
False
It is important for project managers to focus on indirect costs because they can be easily controlled.
False
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
_____ are those costs that are difficult to measure in monetary terms.
Intangible costs
Which of the following is true of the schedule performance index (SPI)?
It can be used to estimate the projected time to complete the project.
Which is true of earned value?
It is an estimate of the value of the physical work actually completed.
Which statement is true of a order of magnitude estimate?
It provides an estimate of what a project will cost.
Which is most likely to be a reason for inaccuracies in information technology cost estimates?
People lack estimating experience.
_____ includes the processes required to ensure that a project team completes a project within an approved budget.
Project cost management
If an important supplier goes out of business, management reserves can be set aside to cover the resulting costs.
T
Which of the following is true of contingency reserves?
They allow for future situations that can be partially planned for.
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
Definitive estimates are made one year or less prior to project completion.
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
One of the reasons why project cost estimates are inaccurate is because human beings are biased toward underestimation.
True
Parametric models are reliable when the models are flexible in terms of the project's size.
True
Supporting details for an estimate include the ground rules and assumptions used in creating the estimate.
True
The formulas for variances and indexes start with EV, the earned value.
True
50. What is a rough order of magnitude estimate also referred to as?
ballpark
What type of estimate is a cost estimation tool that involves estimating individual work items or activities and summing them to get a project total?
bottom-up
The cost performance index (CPI):
can be used to estimate the projected cost of completing the project.
The main goal of the _____ process is to produce a cost baseline for measuring project performance and project funding requirements.
cost budgeting
The main goal of which process is to produce a cost baseline for measuring project performance and project funding requirements?
cost budgeting
Which process results in a cost baseline as a main output?
cost budgeting
Work performance information and cost forecasts are main outputs of the _____ process.
cost control
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 which type of costs?
direct
Which process involves developing an approximation of the costs of resources needed to complete a project?
estimating costs
Which process helps develop an accurate projection of a project's financial expenses and benefits?
life cycle costing
Indirect costs are:
not directly related to the products or services of a project.
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
How are profits best defined?
revenues minus expenditures
Schedule variance is:
the earned value minus the planned value.
Analogous estimates are also known as _____ estimates.
top-down
What term is used for analogous estimates?
top-down
IT project managers must be able to present and discuss project information both in financial and technical terms.
True
If an important supplier goes out of business, management reserves can be set aside to cover the resulting costs.
True
What type of estimate is a cost estimation tool used to allocate money into an organization's budget?
budgetary
What is the first step in project cost management?
plan how costs will be managed
Which method is used for determining the estimated annual costs and benefits for a project?
Cash flow analysis
A budgetary estimate is the most accurate of the three types of estimates.
F
A negative schedule variance means that it took lesser than planned to perform the work.
F
Analogous estimates are the most accurate technique to estimate costs.
F
Intangible costs can be easily measured in monetary terms.
False
Estimates should become more accurate as time progresses.
True
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.
bottom-up
One of the main outputs of the _____ process is a cost baseline.
cost budgeting
What does the process of controlling costs primarily involve?
managing changes to the project budget
Budgetary estimates are made even before a project is officially started.
F
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.
F
27. If the cost performance index (CPI) is less than 100 percent, the project is under budget.
False
Which costs are difficult to measure in monetary terms?
Intangible costs
Which of the following is true of earned value?
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.
Life cycle costing
Which of the following reserves allows for future situations that are unpredictable?
Management reserves
One of the reasons why project cost estimates are inaccurate is because human beings are biased toward underestimation.
T
Supporting details for an estimate include the ground rules and assumptions used in creating the estimate.
T
Project managers must conduct cash flow analysis to determine net present value.
True
Spreadsheets are a common tool for cost estimating, cost budgeting, and cost control.
True
Work performance information and cost forecasts are main outputs of which process?
cost control
Which is an output of the process of controlling costs?
cost forecasts
The process of controlling costs primarily involves:
managing changes to the project budget.
Which type of estimating uses project characteristics in a mathematical model to estimate project costs?
parametric
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.
sunk
Which statement is true of analogous estimates?
They are most reliable when previous projects are similar in fact with current projects.
The project management plan and project funding requirements are inputs of the process of controlling costs.
True