MG 585 - Module 4 - Chapter 10

Which of these methods of estimating can produce the most accurate estimate? a. Parametric b. Analogous c. Bottom-up d. Rolling wave

c. Bottom-up

As the project progresses from initiation through planning and executing, and additional detail is gathered, the range of values for the project cost estimate will: a. broaden. b. stay the same. c. narrow. d. be replaced with a single number.

c. narrow.

Ellen is estimating how much it will cost to recarpet the executive conference room. After selecting the grade and pattern of carpet, Ellen multiplies the carpet price per square yard times the number of square yards in the conference room to derive the total price of the material. This estimating method is called ____________________. a. expert judgment b. analogous estimating c. parametric estimating d. three-point estimating

c. parametric estimating

A fixed cost is described as a cost that __________. a. is necessary to keep the organization running, but is not associated with one specific project b. only occurs because of the project and is often classified as direct labor or other direct costs c. remains the same regardless of the size or volume of work d. varies with the volume of use

c. remains the same regardless of the size or volume of work

The cost management plan includes forecasting and refining cost estimates of all the project activities throughout the duration of the project, and it is integral to the cost management planning process. This plan contains descriptions, procedures, and responsibilities for all of these EXCEPT: a. cost estimating. b. budget determination. c. resource roles and responsibilities. d. cost control.

c. resource roles and responsibilities.

_____ is the process of monitoring the project costs and managing changes to the cost baseline. a. Control cost b. Plan cost management c. Estimate cost d. Determine budget

a. Control cost

What is used to compare actual project spending with planned expenditures to determine if corrective action is needed? a. Cost baseline b. Critical path c. Cost estimate d. Cost management plan

a. Cost baseline

Project teams should consider economic factors as they construct their budget. Which of these is NOT one of those economic factors to be considered during budgeting? a. Direct costs b. Volatility in prices c. Ability to borrow funds d. Availability of resources

a. Direct costs

A(n) ____________________ is used to compare actual project spending with planned expenditures over time to determine if corrective action is needed. a. cost baseline b. funding limit reconciliation c. reserve analysis d. activity resource estimate

a. cost baseline

A __________ estimate is also referred to as a single-point estimate. a. deterministic b. probabilistic c. definitive d. order of magnitude

a. deterministic

An Agile project team member refers to a "spike" during a team meeting. When budgeting projects using Agile methods, which statement BEST describes spike? a. Short, time-boxed effort to test the concept to reduce risk b. Perform as much testing and risk reduction early to gain feedback as soon as possible so needed changes can be made quickly c. The process of developing an approximate and best guess of the monetary value of resources needed to complete all project activities d. A quantified assessment of the likely amount. It should always include an indication of accuracy.

a. Short, time-boxed effort to test the concept to reduce risk

The client has expressed concern about excessive risks in some project deliverables. When budgeting projects using Agile methods, which term BEST describes the short, time-boxed effort to test the concept to reduce risk? a. Spike b. Shift left c. Analogous estimating d. Parametric estimating

a. Spike

What does the Agile term "shift left" mean? a. Teams work exclusively on verifying a specific approach, and adjust their thinking by testing as early as practical in the project anything that will need to be tested at a later stage. b. Move stories from In Progress status on the Kanban board to the left, back to Product Backlog. c. Remove decimal places from estimates. d. Move from various locations to a co-located team environment.

a. Teams work exclusively on verifying a specific approach, and adjust their thinking by testing as early as practical in the project anything that will need to be tested at a later stage.

"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

The project manager at a software company predicts a project's costs based on previous projects that were similar to the current project. What type of cost estimating are they using? a. Parametric b. Analogous c. Bottom-up d. Rolling wave

b. Analogous

An experienced project manager has successfully managed many new office build-outs for their East Coast company. The company just announced that they will be expanding operations to the Midwest, and a lease has been signed for 5,000 square feet of space in Cincinnati. The new office has to be up and running in 3 months, and leadership has asked for a construction estimate by the end of the day. How can the project manager come up with a credible estimate for the new space quickly? a. Tell the manager that you can't come up with an estimate in a few hours. b. Ask the manager questions about the new office space to understand the departments that will be located there, the level of finishes desired, etc. Then base the new budget on previous, similar projects. c. Create a work breakdown structure by using another previous project and generate a bottom-up estimate for each work package.

b. Ask the manager questions about the new office space to understand the departments that will be located there, the level of finishes desired, etc. Then base the new budget on previous, similar projects.

Activity cost estimates, the basis of estimates, and other supporting detail are outputs of which process? a. Determine budget b. Estimate costs c. Plan cost management d. Control costs

b. Estimate costs

Early in a project when very little detail is understood regarding a project, it is impractical to render even a rough estimate of the final project cost. a. True b. False

b. False

The component of the project management plan that includes forecasting and refining cost estimates of all the project activities throughout the duration of the project is called the financial management plan. a. True b. False

b. False

__________ estimates are often used to seek initial project charter approval. a. Budget b. Order of magnitude c. Definitive d. Parametric

b. Order of magnitude

In a time-phased project budget, where the cumulative cost is shown for the project at each point in time, the cumulative cost curve approximates a(n) ___ shape. a. J b. S c. U d. V

b. S

The project sponsor asks for a view of the likely maximum budget that will be required. When budgeting projects using Agile methods, what primarily controls the project budget? a. Baseline b. Salary of team members c. Change-control board d. Program management office

b. Salary of team members

The project team lead overhears the team discussing ideas for reducing risks. When budgeting projects using Agile methods, which term BEST describes performing as much testing and risk reduction early to gain feedback as soon as possible so needed changes can be made quickly? a. Spike b. Shift left c. Analogous estimating d. Parametric estimating

b. Shift left

The project team leader is having difficulty obtaining a definitive budget estimate for the project. When budgeting projects using Agile methods, how are cost uncertainties for specific project components handled? a. Value engineering b. Spikes, shift left, and definition of ready c. Monte Carlo simulation d. PERT analysis

b. Spikes, shift left, and definition of ready

The approved budget, with contingency reserves and any amount of management reserve that has already been approved) serves as a(n) ??? for project control. a. estimate. b. baseline. c. benchmark d. control account

b. baseline.

The ________ defines the cost baseline, modifies it whenever necessary, and uses it for monitoring and controlling costs. a. cost estimate b. cost management plan c. project budget d. bottom-up estimate

b. cost management plan

The time value of money is relevant to project management because: a. the project manager must balance the timing of project cash inflows and outflows. b. discounting the value of future revenue and cost streams enables better project decisions. c. it is important to understand how to calculate the cost of regular and overtime labor. d. as time passes on a project, money is spent.

b. discounting the value of future revenue and cost streams enables better project decisions.

Which of these is an example of an expedited cost? a. The team completes a major deliverable within the normal 40-hour work week. b. New computers are delivered per the agreed dates in the executed purchasing agreement. c. Production work is halted in the factory due to lack of inventory, and management pays extra for rapid delivery of additional material. d. Summer months are slow for the company so management establishes summer hours, where everyone gets Friday afternoons off.

c. Production work is halted in the factory due to lack of inventory, and management pays extra for rapid delivery of additional material.

In Agile projects, cost uncertainties for specific project components are handled differently from plan-driven projects. Which of these is NOT an Agile approach for handling cost uncertainties during budgeting? a. Shift left b. Definition of ready c. Value engineering d. Spikes

c. Value engineering

__________ is defined as a formal and structured approach to reducing cost without decreasing the quality or performance. a. Vendor bid analysis b. Life cycle costing c. Value engineering d. Time value of money

c. Value engineering

Jason, a project manager, is working with his team to estimate the total cost of developing a web-based CRM system. After reviewing the planned scope of work with Jason, his sponsor suggests that Jason use the budget from a previous, similar project as the basis for his project budget. The estimating process that Jason's sponsor is using is called ____________________ estimating. a. three-point b. parametric c. analogous d. single-point

c. analogous

The approved project budget with contingency reserves serves as a(n) _________ for project control. a. estimate b. guideline c. baseline d. reference point

c. baseline

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. bottom-up estimating

An example of a nonrecurring cost is __________. a. cost of writing code b. cost of laying bricks c. developing a design that, once approved, guides the team d. cost of running an assembly line in a factory

c. developing a design that, once approved, guides the team

The process of developing an approximate and best guess of the monetary value of resources needed to complete all project activities is known as: a. determine budget. b. estimate resources. c. estimate cost. d. estimate activities.

c. estimate cost.

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, insurance and clerical assistance d. travel cost for the project team

c. executive salaries, utilities, insurance and clerical assistance

In Agile projects, at what point are budget and definitive estimates created? a. In creating the vision b. By each time box c. Before baselining d. Repeatedly for each release and iteration

d. Repeatedly for each release and iteration

The client is requesting budget details for all requested functionality. When budgeting projects using Agile methods, at what point are budget and definitive estimates created? a. In chartering b. In creating the project vision c. Before baselining d. Repeatedly for each release and iteration

d. Repeatedly for each release and iteration

Which of these is NOT an example of supporting detail pertaining to cost estimates? a. Description of the project scope b. Method used to create the estimate c. Assumptions and constraints d. Schedule milestones

d. Schedule milestones

Agreed-upon estimates are aggregated into a cost budget which will become the baseline for a predictive project. The budget should include all of the below EXCEPT_____. a. contingency reserves b. management reserves c. funds for crashing or fast tracking d. list of identified risks

d. list of identified risks

The budget within the cost baseline that is allocated for identified risks, for which mitigating responses are developed, is called the ____________________. a. contingency reserve b. management reserve c. control account d. activity cost estimate

a. contingency reserve

The task cost value is the sum of all assignment cost values, plus any task's _____ cost value. a. fixed b. standard c. overtime d. indirect

a. fixed

Project managers should not lie to themselves or to anyone else regarding project costs. a. True b. False

a. True

A manufacturing company will be purchasing two sophisticated pieces of equipment for the factory floor. The project manager for this procurement has distributed the detailed specifications to a number of vendors and is waiting for the bid responses. When analyzing the vendor's bids, the PM can do a number of things to determine if the vendor's bid prices appear to be reasonable. Which of these actions would NOT be appropriate for the vendor bid analysis? a. Compare the bids and assume that the lowest responsible offer is fair. b. Review business publications and industry websites to determine if the prices are in line with industry standards. c. Select one of the lower-priced vendors with a good reputation and negotiate with them for the best price. d. Implement activity-based costing (ABC).

d. Implement activity-based costing (ABC).

The amount of money placed into contingency reserve is calculated during risk analysis and is often in the range of __________ to __________ percent of the total project. a. 5; 10 b. 10; 15 c. 15; 20 d. 25; 30

a. 5; 10

he sponsor of the project has expressed concern about too much testing being carried out early in the project. When budgeting projects using Agile methods, which statement BEST describes "shift left"? a. Perform as much testing and risk reduction early to gain feedback as soon as possible so needed changes can be made quickly b. The process of developing an approximate and best guess of the monetary value of resources needed to complete all project activities c. A quantified assessment of the likely amount. It should always include an indication of accuracy. d. Short, time-boxed effort to test the concept to reduce risk

a. Perform as much testing and risk reduction early to gain feedback as soon as possible so needed changes can be made quickly

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.

A bit more information is needed to complete a parametric cost estimate as compared to an analogous estimate. a. True b. False

a. True

A contingency reserve is money assigned to the project and allocated for identified risks (known unknowns) that may or may not occur. a. True b. False

a. True

Cost estimating is linked very closely with scope, schedule and resource planning and is often performed simultaneously with creating the schedule. a. True b. False

a. True

Direct costs typically include the cost of direct labor as well as other direct costs for items such as consumable materials, travel, subcontracts, equipment, and computer time. a. True b. False

a. True

Estimate Cost is the process of developing an approximate and best guess of the monetary value of resources needed to complete all project activities. a. True b. False

a. True

Fixed costs are those that 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. True

On Agile projects, estimating is iterative in that at the start only an order of magnitude estimate is created for the entire project at the same time the product owner is establishing the project vision. a. True b. False

a. True

On small projects, the cost management plan may be as simple as developing accurate estimates, securing the funding, and designing cost reporting procedures to ensure that the money is spent correctly. a. True b. False

a. True

Regardless of what method is used to estimate project costs, estimates should be documented, and the level of confidence in the estimate should be described. a. True b. False

a. True

An indirect cost is described as a cost that __________. a. is necessary to keep the organization running, but is not associated with one specific project. b. only occurs because of the project and is often classified as direct labor or other direct costs. c. repeats as the project work continues d. occurs when the project must be conducted faster than normal

a. is necessary to keep the organization running, but is not associated with one specific project.

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. reserve

n Agile projects, teams adjust their thinking so they test as early as practical anything that will ultimately need to be tested in order to reduce risk, improve quality, and improve the accuracy of estimates. This practice is referred to as: a. shift left b. time box c. spike d. planning poker

a. shift left

The Agile project team is establishing a timeline for budget estimates. When budgeting projects using Agile methods, at what point is an order of magnitude estimate created? a. In chartering b. In creating the project vision c. Before baselining d. Repeatedly for each release and iteration

b. In creating the project vision

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 cost information that the project manager, sponsor, and other stakeholders can use to make intelligent and ethical decisions. b. It documents all of the project risks and the amount of reserves required. 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. It documents all of the project risks and the amount of reserves required.

The sponsor is asking to see the amount of management reserves in the project. When budgeting projects, which statement BEST describes management reserves? a. Extra money in the project budget to be used if necessary—usually if a risk event occurs b. Money assigned to the project for unknown possible costs, which is controlled by senior management c. Money assigned to the project and allocated for identified risks for which contingent responses are developed d. A technique for estimating the duration or cost of an activity or a project using historical data from a similar activity or project

b. Money assigned to the project for unknown possible costs, which is controlled by senior management

________ is "an estimating technique in which an algorithm is used to calculate cost or duration based on historical data and project parameters." a. Definitive estimating b. Parametric estimating c. Analogous estimating d. Order of magnitude estimating

b. Parametric estimating

The sponsor is reviewing the project budget but is concerned about how significantly the budget is expected to vary. When budgeting projects using Agile methods, how are overall project cost uncertainties handled? a. Reserves b. Plan for team size by time box c. Monte Carlo simulation d. PERT analysis

b. Plan for team size by time box

Which of the answers below is NOT one of the three types of data that Microsoft Project uses to compute each assignment's cost value? a. Assignment work hours b. Task costs c. Resource standard rate d. Resource overtime rate

b. Task costs

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

One of the principal benefits of creating a bottom-up estimate during planning is that the estimate: a. can be created quickly. b. is very accurate. c. matches the high-level estimate in the project charter. d. will not change once the project is in flight.

b. is very accurate.

Determine budget is "the process of aggregating the estimated costs of individual activities or work packages to establish an authorized time-phased project budget or cost baseline." This is used for ____________________ projects. a. Agile b. plan-driven c. iterative d. both Agile and plan-driven

b. plan-driven

This term refers to improving the accuracy and elaborating the scope plan continuously with more detailed and specific information as the project progresses, leading to a better and more accurate cost estimate with each successive plan iteration. a. empirical estimating b. progressive elaboration c. grass roots estimating d. analogous estimating

b. progressive elaboration

During Agile project estimating, a "spike" is undertaken when the team __________. a. wants to develop a definitive cost estimate for the entire project b. wants to work exclusively on verifying a specific approach to lessen risk c. agrees to "shift left." d. agrees to do value engineering

b. wants to work exclusively on verifying a specific approach to lessen risk

__________ costs are those that remain the same regardless of the size or volume of work. a. Direct b. Indirect c. Fixed d. Variable

c. Fixed

What type of costs do NOT depend on the size of the project? a. Variable costs b. Direct costs c. Fixed costs d. Indirect costs

c. Fixed costs

Variations in project costs can be partially explained by the presence of certain events associated with a project. _______ are events discovered during planning that can be estimated directly. a. Known unknowns b. Work packages c. Known knowns d. Unknown unknowns

c. Known knowns

The "process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs" is referred to as: a. determine budget. b. estimate costs. c. plan cost management. d. control costs.

c. plan cost management.

During which phase of a project life cycle do recurring costs typically occur? a. Planning b. Selecting and initiating c. Closing and realizing d. Executing

d. Executing

The amount of project budget reserved for unforeseen project work that addresses the "unknown unknowns" that can affect a project is the ____________________. a. project buffer b. funding limit c. contingency reserve d. management reserve

d. management reserve

A project cost management plan needs to be consistent and aligned with the methods of the __________. a. project sponsor b. project manager c. team d. parent organization

d. parent organization

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. recurring costs

Using _____________ level cost estimates, a projected duration and cost estimate of the entire project can be provided to project stakeholders when later project stage details are not known. a. analogous b. parametric c. bottom-up d. summary

d. summary