PM chp 7

Plot__________ curves on the same graph to reveal any trends toward improving or deteriorating cost performance.

CBC, CAC, and CEV

Committed costs are also known as discharged or postponed costs.

False

The key to effective cost control is waiting to address negative cost variances and cost inefficiencies after they are identified.

False

The key to managing cash flow is to ensure that cash comes in faster than it goes out.

False

The percent complete estimate for a work package is subjective and requires an underestimated guess compared to the scope of the work package.

False

When the CPI goes below 1.0 or gradually gets smaller, corrective action should not be taken, the project is performing well.

False

Based on analysis of actual cost it is possible to forecast what the total costs will be at the completion of the project or work package.

True

Cumulative actual cost (CAC) should be calculated to compare to the cumulative budgeted cost (CBC).

True

If you put off corrective actions until some point in the distant future, the negative cost variance may deteriorate in the project.

True

In many cases, there will be a tradeoff—reducing cost variances will involve a reduction in project scope or a delay in the project schedule.

True

In many projects, large dollar amounts are expended for materials or services (subcontractors, consultants) that are used over a period of time longer than one cost reporting period.

True

It is good practice to have the person who will be responsible for the costs associated with the work make the cost estimates.

True

The key to effective cost control is to analyze cost performance on a regular and timely basis.

True

Allocating total project costs for the various elements to the appropriate work packages will establish

a. a total budgeted cost (TBC) for each work package.

When evaluating work packages that have a negative cost variance, you should focus on taking corrective actions to reduce the costs of:

a. activities that have a large cost estimate.

The total project cost is often estimated during the_______ phase of the project or when the project charter or a proposal is prepared

a. initiating

The cost performance index (CPI) is a measure of the cost efficiency with which the project is being performed. If the cumulative earned value is greater than the cumulative actual costs, then

a. the CPI is greater than 1.0.

Earned value, the value of___________, is a key parameter that must be determined throughout the project.

a. the work actually performed

When the budgets for all the work packages are summed,

a. they cannot exceed the total project budgeted cost.

Travel costs in the project costs estimate are for

a. travel (other than local travel) required during the project.

The _____ is the sum of the estimated costs of all the specific activities that make up a work package or the project.

a.total budgeted cost (TBC)

____ involves the following: Analyzing cost performance to determine which work packages may require corrective action, Deciding what specific corrective action should be taken, and Revising the project plan— including time and cost estimates—to incorporate the planned corrective action.

b. Cost control

The ________ for the entire project or each work package provides a baseline against which actual cost and work performance can be compared at any time during the project.

b. cumulative budgeted cost (CBC)

The budget for each work package is

b. distributed over the duration of the work package.

It may be easier to estimate the costs for________, but as the project progresses, the project team can progressively elaborate the estimated costs as more information is known or becomes clear to allow for more accurate estimated costs.

b. near-term activities

Labor costs in the project costs estimate are the estimated costs for the various types or classifications of ___________ and are based on the estimated work time (not necessarily the same as the activity estimated

b. people who are expected to work on the project

Contingency costs in the project costs estimate, also referred to as _________, are to cover unexpected situations that may come up during the project, such as items that may have been overlooked when the initial project scope was defined, activities that may have to be redone because they may not work the first time (redesigns), or a high probability or high impact risk that may occur.

b. reserves

Costs related to ___________ are for outsourced work when the project teams or contractors do not have the expertise or resources to do certain project tasks.

b. subcontractors and consultants

A method for calculating the forecasted cost at completion assumes that the work to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far. If the cost performance index is greater than 1.0, then

b. the FCAC is less than the TBC.

The project cost estimate is allocated to

b. the resources in the project.

A cost is determined for each period, based on when the activities that make up the work package are scheduled to be performed, to create

b. the time-phased budget.

Determining the earned value involves collecting data on the percent complete for each work package and then converting this percentage to a dollar amount by multiplying the _______ of the work package by the percent complete.

b. total budgeted cost (TBC)

When evaluating work packages that have a negative cost variance, you should focus on taking corrective actions to reduce the costs of:

c. activities that will be performed in the near term.

To keep track of _________, it's necessary to set up a system to collect, on a regular and timely basis, data on funds actually expended.

c. actual cost on a project

As data are collected on _______, including portions of any committed cost, they need to be totaled by work package so that they can be compared to the ________

c. actual cost, cumulative budgeted cost.

The _____ is the amount that was actually spent to accomplish the work that was scheduled to be performed up to that point in time.

c. cumulative actual cost (CAC)

The __________ is the amount that was budgeted to accomplish the work that was scheduled to be performed up to that point in time.

c. cumulative budgeted cost (CBC)

Large projects would have charge codes for the work package numbers to

c. determine how the actual costs compare to the planned costs.

Once a total budgeted cost has been established for each work package, the second step in the project budgeting process is to

c. distribute each TBC over the duration of its work package.

At the beginning of the project, it may not be possible to estimate the costs for all activities with a level of confidence regarding their accuracy. This is especially true for

c. longer-term projects.

Another indicator of cost performance is cost variance (CV). If the cumulative earned value is greater than the cumulative actual costs, then

c. the CV is positive.

A second method for determining the forecasted cost at completion assumes that, regardless of the efficiency rate the project or work package has experienced in the past, the work to be performed on the remaining portion of the project or work package will be done according to budget. If the cumulative actual cost is greater than the cumulative earned value, then

c. the FCAC is greater than the TBC.

Managing cash flow involves making sure that sufficient payments are received from the customer in time so that

c. you have enough money to cover the costs of performing the project.

If the cumulative earned value is $10 and the cumulative actual costs are $20, then the CPI is

d. 0.5

It's crucial that cost variances and inefficiencies be identified early so that

d. corrective action can be taken before the situation gets worse.

The contractor's outflow of cash can be controlled by

d. delaying payment until it is due.

The contractor might try to negotiate payment terms that require the customer to do one or more of the following except

d. make a single payment at the end of the project.

Materials costs in the project costs estimate are the estimated costs of materials that the project team or contractor

d. needs to purchase for the project.

Equipment costs in the project costs estimate are for equipment

d. that must be purchased as part of the project

There are two approaches to establishing the total budgeted cost for each work package:

d. top-down and bottom-up.

It's important that the person estimating the percent complete not only assess how much work has been performed but also consider

d. what work remains to be done.

Costs are ________ when an item is ordered even though actual payment may take place at some later time.

d. committed

It is important to use the__________ as the standard against which actual cost is compared.

phased budget