CH 7
The cost performance index can be used to calculate the
estimate at completion(EAC)
costs or benefits are costs or benefits that are difficult to measure inmonetary terms
intangible
____ is the earned value minus the actual cost
CV
is a document that describes how the organization willmanage cost variances on the projec
cost management plan
____ is done very early in a project or even before a project is officially started
rough order of magnitude estimate
cost is money that has been spent in the past
sunk
Using simplified percentage complete amounts for a one-year project with weekly reporting and an average task or work packet size of one week, you can expect about a(n) ____ percent error rate
1
The Standish Group's CHAOS studies reported an average cost overrun for unsuccessful IT projects ranged from 180 percent in 1994 to ____ percent in 2002.
43
The ____ is the total direct and indirect costs incurred in accomplishing work on an activity during a given period.
AC
____ use the actual cost of a previous, similar project as the basis for estimating the cost of the current project.
Analogous estimates
t/f In an earned value chart, when the actual cost line is right on or above the earned value line, costs are less thanor equal to planned
F
t/f Learning curve theory does not apply to the amount of time it takes to complete some tasks.
F
t/f Organizations have a history of spending too much money in the early phases of information technology projects.
F
t/f Parametric models are least reliable when historical information was used to create the model.
F
t/f Preparing cost estimates is a job for accountants
F
t/f The people who develop software cost estimates often have a great deal of experience with cost estimation
F
t/f There does not need to be a change control system to define procedures for changing the cost baseline
F
t/f When deciding what projects to invest in or continue, you should include sunk costs.
F
t/f When developing an estimate for a large software project, estimates cannot be made before clear systemrequirements have been produced
F
The ____ is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity.
RP
The ____ is the ratio of earned value to planned value and can be used to estimate the projected time to completethe project.
SPI
___ is the earned value minus the planned value
SV
t/f A large percentage of total project costs are often labor costs
T
t/f Any new technology or business process is untested and has inherent risks
T
t/f Cost budgeting provides information for project funding requirements.
T
t/f Estimates are usually done at various stages of a project and should become more accurate as time progresses
T
t/f Every cost estimate is unique
T
_________ ____________ and SPI less than one or less than 100 percentindicate problems.
_Cost performance index (CPI)
costs are often much higher for contractors
_________Labor___________
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
____ is used to allocate money into an organization's budget
budgetary estimate
____ is a method for determining the estimated annual costs and benefits for a project and the resulting annualcash flow.
cash flow analysis
The project management plan, project funding requirements, work performance data, and organizational process assets are inputs for the process of ____
controlling costs
A ____ 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, cost budgeting provides a(n) _______ __________
cost baseline
____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance
cost budgeting
A ____ is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs
definitive estimate
14. Project managers should focus on ____, since they can control them.
direct costs
____ is a project performance measurement technique that integrates scope, time, and cost data.
earned value management
7. The WBS is not a required input to the cost budgeting process.
false
Databases are a common tool for cost estimating, cost budgeting, and cost control.
false
If the cost performance index is less than one or less than 100 percent, the project is under budget.
false
Learning curve theory does not apply to the amount of time it takes to complete some tasks.
false
Preparing cost estimates is a job for accountants.
false
Information technology project managers need to be able to present and discuss project information in ________ ____________ terms as well as in technical terms
financial
____ allow for future situations that are unpredictable
management reserves
____ is the ratio of revenues to profits
profit margin
A ____ is done very early in a project or even before a project is officially started
rough order of magnitude estimate
A ____ provides an estimate of what a project will cost.
rough order of magnitude estimate
____ provides an estimate of what a project will cost
rough order of magnitude estimate
____ should be forgotten.
sunk costs
13. ____ are those costs that an organization can easily measure in dollars.
tangible costs
____ are those costs that an organization can easily measure in dollars
tangible costs
6. The cost management plan is part of the overall project management plan.
true
Any new technology or business process is untested and has inherent risks
true
Project managers must conduct cash flow analysis to determine net present value
true
t is helpful to analyze the total dollar value as well as the percentage of the total amount for each major __________ ___________________ category.
work breakdown structure (WBS)_
t/f Many projects that are started never finish because of cost management problems.
T
t/f Many projects, particularly information technology projects, do not have good planning information, sotracking performance against a plan might produce misleading information
T
t/f Most organizations have a well-established process for preparing budgets
T
The main goal of the ____ process is to produce a cost baseline for measuring project performance and projectfunding requirements.
cost budgeting
The main outputs of the __________ __________ process are a cost performance baseline, project funding requirements, and project document updates
cost budgeting
The main outputs of the __________ __________ process are work performance measurements, budget forecasts, organizational process asset updates, change requests, project management plan updates, and project document updates.
cost control
The main outputs of the ___________________ process are activity cost estimates, basis of estimates, and project document updates
cost estimating_
Using good __________ ___________ can change the false perception that costs growand failures are to be expected
cost management ____
__ are revenues minus expenditures.
profits
t/f Databases are a common tool for cost estimating, cost budgeting, and cost control
F
allows you to see a big-picture view of the cost of a projectthroughout its life cycle.
Life cycle costing
considers the total cost of ownership, or development plus supportcosts, for a project.
Life cycle costing
ROM estimates can be referred to as a ballpark estimate, a guesstimate, a swag, or a broad gauge
true
____ allow for future situations that may be partially planned for
contingency reserves
If the cost estimate will be the basis for contract awards and performance reporting, it should be a ____ and asaccurate as possible
definitive estimate
____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance
determining the budget
Project managers should focus on ____, since they can control them
direct costs
The ____ is an estimate of what it will cost to complete the project based on performance to date.
EAC
The ____ is an estimate of the value of the physical work actually completed.
EV
Variances are calculated by subtracting the actual cost or planned value from ___
EV
states that when many items are produced repetitively, the unitcost of those items decreases in a regular pattern as more units are produced
Learning curve theory
____ involve estimating individual work items or activities and summing them to get a project total.
Bottom-up estimate
t/f A definitive estimate should be the least accurate of the three types of estimates
F
Three separate surveys of software project cost overruns found that the average cost overrun for all of the projects in their survey samples (not just unsuccessful projects) were ____ percent
33-34
The Standish Group's CHAOS studies reported an average cost overrun for unsuccessful IT projects ranged from 180 percent in 1994 to ____ percent in 2004
56
____ involves developing an approximation or estimate of the costs of the resources needed to complete a project.
Estimating costs
The ____ is that portion of the approved total cost estimate planned to be spent on an activity during a given period
PV
uses project characteristics in a mathematical model to estimate project costs
Parametric modeling
It's important for the team to _________ ___________ assumptions they made when developing thecost baseline and have several experts review it.
document
Since organizations depend on reliable information technology, there are also huge costs associated with ___
downtime
Tom DeMarco, a well-known author on software development, suggests ____ reasons for the inaccuracies of many information technology project cost estimates and some ways to overcome them.
four
Many organizations now collect and control an entire suite of projects or investments as one set of interrelatedactivities in one place, called a(n
portfolio
t/f If a project manager gets sick for two weeks or an important supplier goes out of business, management reservecould be set aside to cover the resulting costs
T
t/f Project managers must conduct cash flow analysis to determine net present value
T
t/f ROM estimates can be referred to as a ballpark estimate, a guesstimate, a swag, or a broad gauge
T
t/f The cost management plan is part of the overall project management plan
T
t/f The formulas for variances and indexes start with EV, the earned value.
T
The ____ is the ratio of earned value to actual cost and can be used to estimate the projected cost of completingthe project
CPI
t/f Although information technology projects have a poor track record in meeting project goals, they have a goodtrack record in meeting budget goals
F
t/f Direct costs cannot be directly attributed to a certain project.
F
t/f If cost variance is a positive number, it means that performing the work cost more than planned.
F
t/f If the cost performance index is less than one or less than 100 percent, the project is under budget
F
t/f The WBS is not a required input when developing a cost estimate.
F
t/f When justifying investments in new information systems and technology, the focus should only be on revenuesor expenses.
F
The ____ is the ratio of actual work completed to the percentage of work planned to have been completed at anygiven time during the life of the project or activity.
RP
After you total the EV, AC, and PV data for all activities on a project, you can use the CPI and ______________ __________________ to project how much it will costand how long it will take to finish the project based on performance to date.
_schedule performance index (SPI)__
is the original project plan plus approved changes.
baseline
____ are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project.
indirect costs
___ helps you develop an accurate projection of a project's financial costs and benefits.
life cycle costing
has many cost management features to help you enter budgeted costs, set a baseline, enter actuals, calculate variances, and run various cost reports.
microsoft project
In general, ________ ____________ numbers for cost and schedule variance indicate problems in thoseareas
negative
A(n) ____ might provide an estimate of $50 per line of code for a software development project based on the programming language the project is using, the level of expertise of the programmers, the size and complexityof the data involved, and so on
parametric model
____ includes the processes required to ensure that a project team completes a project within an approved budget
project cost management
____, with assistance from financial experts in their organizations, should create estimates of the costs and benefits of the project for its entire life cycle
project managers
