Chapter 7 Content

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A rough order of magnitude estimate can be referred to as a _____ estimate.

Ballpark

A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs.

Definitive

If the cost estimate for a project is a basis for contract awards and performance reporting, it should be a(n) _____ estimate and as accurate as possible

Definitive

The first step in project cost management is:

Develop estimates

Soles is a footwear company which has recently set up its store in Ambrosia. To manufacture its products, Soles incurs a range of different costs. Which of the following would be an example of an indirect cost?

Electricity used to run its locations

Which of the following involves developing an approximation of the costs of resources needed to complete a project?

Estimating Costs

Analogous estimates are the most accurate technique to estimate costs.

False

Budgetary estimates are made even before a project is officially started.

False

Contingency reserves are also known as unknown unknowns.

False

The formulas for variances and indexes start with EV, the earned value.

False

The primary output of the planning cost management process is a change request.

False

____ helps develop an accurate projection of a project's financial expenses and benefits.

Life-cycle costing

_____ includes the processes required to ensure that a project team completes a project within an approved budget.

Project Cost Management

Analogous estimates are also known as _____ estimates

Top-Down

A schedule performance index of one means that the project is on schedule

True

Estimates should become more accurate as time progresses.

True

IT project managers must be able to present and discuss project information both in financial and technical terms.

True

If an important supplier goes out of business, management reserves can be set aside to cover the resulting costs.

True

Parametric models are reliable when the models are flexible in terms of the project's size.

True

The project management plan and project funding requirements are inputs of the process of controlling costs.

True

Which of the following is true of earned value?

t is an estimate of the value of the physical work actually completed.

When deciding what projects to invest in or continue, one should include sunk costs

False

Newtech Inc. hires John for the position of a software programmer to work on their new project. Salary paid to John by Newtech Inc. would be an example of _____ costs

Direct

Intangible costs can be easily measured in monetary terms.

False

Overrun is the additional percentage amount by which estimates exceed actual costs.

False

Direct costs are:

Not directly related to the products or services of a project.

A cost estimation tool which is used to allocate money into an organization's budget is known as a _____ estimate.

Buggetary

If the cost performance index (CPI) is less than 100 percent, the project is under budget.

False

_____ are those costs that are difficult to measure in monetary terms.

Intangible Coata

_____ uses project characteristics in a mathematical model to estimate project costs.

Parametric Estimating

Good Earth, a company manufacturing packaged food products, sets up its stores in Baltonia. However, a year later, the company closes the store down due to high operating costs. In such a scenario, the money spent in paying for the rent of the store in Baltonia would be an example of _____ costs.

Sunk

In a bottom-up estimate, the size of the individual work items is one of the factors that drives the accuracy of the estimates.

True

It is important for project managers to understand that every cost estimate is unique.

True

One of the reasons why project cost estimates are inaccurate is because human beings are biased toward underestimation.

True

Project managers must conduct cash flow analysis to determine net present value.

True

Supporting details for an estimate include the ground rules and assumptions used in creating the estimate.

True


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