Ch. 10
5. Cost estimating is linked very closely with scope, schedule and resource planning. a. True b. False
A
6. Project managers should not lie to themselves or others regarding project costs. a. True b. False
A
31. Which estimating technique uses a statistical relationship between historical data and other variables (e.g., square footage in construction, lines of code in software development) to calculate an estimate for scope, cost and duration? a. analogous estimating b. parametric estimating c. bottom-up estimating d. Monte Carlo estimating
B
7. Fixed costs remain the same regardless of the size or volume of work, while variable costs vary directly with volume of use. a. True b. False
A
1. The component of the project management plan that describes how project costs will be planned, structured and controlled is called the project financial plan. a. True b. False
B
8. The project scope does not come into play when considering fixed and variable cost choices. a. True b. False
B
12. Regardless of what method is used to estimate project costs, supporting detail should be provided. a. True b. False
A
2. Plan Cost Management is the process to determine how to plan, estimate, and control project costs. a. True b. False
A
20. Both normal and special cause variation add to project cost and need to be considered by project managers. a. True b. False
A
21. Vendor bid analysis is used to determine whether the price being asked by the vendors appears to be reasonable. a. True b. False
A
23. A project manager needs to ensure that the cumulative amount of cash coming into the project either from internal budgeting or from customer payments meets or exceeds the demands for paying cash out. a. True b. False
A
29. Which of the following terms best describes extra money in the project budget to be used if necessary - usually if a risk event occurs? a. reserve b. insurance c. padding d. discretionary fund
A
3. On small projects, the cost management plan may be as simple as ensuring accurate estimates are made, securing the funding, and developing cost reporting procedures to ensure that the money is spent correctly. a. True b. False
A
30. Complex projects such as research and development for new products often employ rolling wave planning to estimate costs. Which of the following best describes "rolling wave" planning? a. Project managers render a definitive estimate for the first stage and an order of magnitude estimate for the remainder of the project. b. Project managers render an order of magnitude estimate for the first stage and a definitive estimate for the remainder of the project. c. Project managers render definitive estimates for all stages of the project during initiation. d. Project managers render an order of magnitude estimate for all stages of the project.
A
32. All of the following factors must be in place in order to develop an analogous estimate effectively EXCEPT: a. An organization must know details behind the time value of money. b. An organization must know how and to what extent the proposed project differs from the previous project. c. An organization must have experience in performing similar projects. d. An organization must know how much previous projects actually cost.
A
38. Activity based costing allocates overhead (indirect costs) to fixed costs based upon four different types of drivers. Which of the following is one of the cost drivers that serves as a basis of cost allocation? a. number of units produced b. number of labor hours c. quantity of materials used d. direct equipment costs
A
42. "Unknown unknowns" are unexpected events which can occur when the project is underway. All of the following accurately describe an implication associated with unknown unknowns EXCEPT: a. They are usually discovered during risk identification b. They need to be covered in the project budget. c. They usually require the use of management reserve. d. They usually cause an increase in cost and / or schedule.
A
10. Recurring costs tend to occur during project planning and closing while nonrecurring costs tend to occur during project execution. a. True b. False
B
11. Typically, expedited costs are preferred over regular costs. a. True b. False
B
14. Early in a project when very little detail is known about a project, it is impractical to render even a rough estimate of the final project cost. a. True b. False
B
15. Analogous estimating is the most detailed, time consuming and accurate way to estimate. a. True b. False
B
17. Generally, parametric estimating requires less information and time than analogous estimating. a. True b. False
B
19. Inflating the value of future revenue and cost streams to account for the time value of money enables better project decisions. a. True b. False
B
24. The cost management plan provides guidelines to the project manager and other stakeholders and serves all of the following purposes EXCEPT: a. It shows how to develop and share relevant, accurate and timely information on cost that the project manager, sponsor and other stakeholders can use to make intelligent and ethical decisions. b. It documents how the project statement of work and business case should be created. c. It helps all project stakeholders focus appropriately on schedule and cost performance. d. It provides feedback, thereby showing how the project's success is linked to the business objectives for which it was undertaken.
B
28. What type of cost is incurred when a project must be conducted faster than normal, and overtime for workers and / or extra charges for rapid delivery from suppliers are necessary? a. marginal costs b. expedited costs c. nonrecurring costs d. variable costs.
B
33. Which estimating technique uses a statistical relationship to calculate cost or duration based on historical data and other project parameters? a. empirical estimating b. parametric estimating c. grass roots estimating d. analogous estimating
B
35. The documentation of a project cost estimate generally requires substantial supporting detail to include all of these EXCEPT: a. a description of scope. b. management reserve needs c. the estimating methods and a range of possible outcomes. d. assumptions and constraints.
B
25. The process of developing an approximation of monetary resources needed to complete project activities is known as: a. determine budget. b. estimate resources. c. estimate cost. d. estimate activities.
C
26. Projects often include indirect costs that are necessary to keep the organization running, but are not associated with one specific project. Which of the following items are most typically considered to be indirect costs? a. costs associated with material and purchased parts b. the cost of labor provided by project team members, consultants and subcontractors c. executive salaries, utilities and insurance d. travel cost for the project team
C
34. Which estimating technique decomposes the work into lower, more detailed pieces, preferably the lowest level of WBS work elements, for which estimates are prepared and then aggregates them into a total quantity for the project? a. piece meal pricing b. decomposition estimating c. bottom-up estimating d. grass roots estimating
C
37. All of the following items describe an aspect of life cycle costing EXCEPT: a. Life cycle cost includes the cost of both creating the project and of using the result of the project during its useful life. b. Many project selection decisions are made based upon life cycle cost. c. Life cycle cost only includes the project cost from initiating through closing d. Project managers may need to consider disposal costs of the product after its useful life is complete to calculate total life cycle cost.
C
27. Costs that repeat as project work continues such as the cost of writing code or laying bricks are appropriately classified as: a. fixed costs. b. indirect costs. c. nonrecurring costs. d. recurring costs
D
40. Consider the time-phased budget presented in Figure 9-1. What is the cumulative project budget through the end of April? a. $ 8.000 b. $20,000 c. $38,000 d. $46,000 PICTURE
D
13. A contingency reserve is money assigned to the project and allocated for identified risks for which contingent responses are developed. a. True b. False
A
16. Most projects will employ bottom-up estimating at some point to serve as a basis for estimating cash flow needs and for controlling the project. a. True b. False
A
18. On agile projects, project managers may use rolling wave planning to estimate costs. a. True b. False
A
22. Value engineering is aimed at increasing the value or productivity of a work element while minimizing the cost. a. True b. False
A
4. Estimate Cost is the process of developing an approximation of the monetary resources needed to complete project activities. a. True b. False
A
9. Direct costs typically include the cost of direct labor as well as other direct costs for items such as material, travel, subcontracts and computer time. a. True b. False
A
36. There are many causes of variation in project costs. Which of the following accurately describes the nature of this variation? a. Variation is generally greater on projects that use well-known technology and an experienced project team. b. Variation occurs in all work processes and the novelty associated with most projects creates many opportunities for variation. c. Special cause variation comes from many small causes that are inherent in a work process. d. Normal cause variation is when something out of the ordinary occurs
B
39. The _________is the approved budget, usually in a time distribution format, that is used to estimate, monitor, and control the overall cost performance of the project. a. management baseline. b. cost baseline. c. cost benchmark d. control account
B
41. Events discovered during Identify Risks that may or may not occur are often categorized as: a. known knowns b. known unknowns c. unknown unknowns d. known certainties
B
43. A milestone is a typical measuring point used when establishing cost control. Which of the following does NOT accurately describes the use of cost control milestones? a. Project managers can use their cash flow projections to determine the funding needed to reach each milestone. b. Project managers and sponsors often decide the number of milestones jointly. c. Milestones are often identified in the project charter. d. Milestones are developed during risk planning.
D