Chapter 9 PM Questions

The process of developing an approximation of the cost of the monetary resources needed to complete project activities is known as: a. capital budgeting. b. estimate resources. c. estimate cost. d. activity resourcing.

c. estimate cost.

Projects often include indirect costs that are not associated directly 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. executive salaries, utilities and insurance

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. Project managers render a definitive estimate for the first stage and an order of magnitude estimate for the remainder of the project.

Which of the following terms best describes a provision in the project management plan to mitigate cost and / or schedule risk? a. reserve b. insurance c. padding d. discretionary fund

a. reserve

All of the following are among the benefits realized as a consequence of developing a cost management plan EXCEPT: a. It shows how to develop and share relevant, accurate and timely information that stakeholders can use to make intelligent and ethical decisions. b. It documents how the business case should be created c. It helps stakeholders to focus on schedule and performance as well as cost. d. It provides feedback that shows how the project's success is related to business objectives.

b. It documents how the business case should be created

All of the following items describe an aspect of life cycle costing EXCEPT: a. Life cycle cost includes the cost of creating the project and using the result. 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 product disposition costs to calculate total life cycle cost.

c. Life cycle cost only includes the project cost from initiating through closing

Which estimating technique decomposes the work into detailed pieces for which estimates are prepared and then aggregated into a total quantity for the project? a. piece meal pricing b. decomposition estimating c. bottom-up estimating d. grass roots estimating

c. bottom-up estimating

In addition to optimizing project life cycle costs, value engineering can also be used to improve quality or expand market share. true or false

true

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. true or false

true

Regardless of what method is used to estimate project costs, supporting detail should be provided. true or false

true

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. known unknowns

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. management reserve needs

Which estimating technique uses an algorithm 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. parametric estimating

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 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. An organization must know details behind the time value of money.

"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. They are usually discovered during risk identification

Which estimating technique uses historical data from a similar project as a starting point for creating a time or cost estimate? a. analogous estimating b. parametric estimating c. bottom-up estimating d. Monte Carlo estimating

a. analogous estimating

Activity based costing allocates indirect costs to fixed costs based on different types of cost drivers. Which of the following is one of the cost drivers that serve 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. number of units produced

The approved time-phased project budget, excluding any management reserves, which can be changed only through formal change control procedures and is used as a basis of comparing actual results, is called a ____: a. measurement baseline. b. cost baseline. c. cost benchmark d. control account

b. cost baseline.

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. expedited costs

Both normal and special cause variation add to project cost and need to be considered by project managers. true or false

true