Q7

33: _____ are those costs that are difficult to measure in monetary terms. A. Intangible costs B. Direct costs C. Tangible costs D. Fixed costs

Answer: A. Intangible costs Feedback: Intangible costs are costs that are difficult to quantify or measure in monetary terms. Examples include costs related to reputation, employee morale, or customer satisfaction.

1: Which of the following is true of the schedule performance index (SPI)? A. It can be used to estimate the projected time to complete the project. B. It means that a project is behind schedule if an SPI is greater than one. C. It means that a project is ahead of schedule if SPI is lesser than one or hundred percent. D. It is the ratio of planned value to actual costs.

Answer: A. It can be used to estimate the projected time to complete the project. Feedback: The Schedule Performance Index (SPI) is a measure of schedule efficiency calculated as the ratio of earned value to planned value. An SPI value greater than 1 indicates that the project is ahead of schedule, while a value less than 1 indicates that the project is behind schedule.

31: Which of the following is true of contingency reserves? A. They allow for future situations that can be partially planned for. B. They are also known as unknown unknowns. C. They are not included in a cost baseline. D. They allow for dollar amounts to be used to cover existing, fixed costs.

Answer: A. They allow for future situations that can be partially planned for. Feedback: Contingency reserves are budgeted amounts set aside to address anticipated risks or uncertainties in a project. They are included in the cost baseline and are used to cover the costs of identified risks that may occur.

24: A cost estimation tool which is used to allocate money into an organization's budget is known as a _____ estimate. A. budgetary B. definitive C. rough order of magnitude D. ballpark

Answer: A. budgetary Feedback: A budgetary estimate is used to allocate money into an organization's budget. It provides a preliminary estimate of project costs to assist in financial planning and budgeting.

35: The main goal of the _____ process is to produce a cost baseline for measuring project performance and project funding requirements. A. cost budgeting B. cost planning C. cost controlling D. cost estimating

Answer: A. cost budgeting Feedback: The main goal of the cost budgeting process is to produce a cost baseline, which serves as a standard for measuring project performance and determining project funding requirements.

18: 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. A. direct B. indirect C. sunk D. intangible

Answer: A. direct Feedback: Direct costs are expenses that can be directly attributed to a specific project or activity. In this case, the salary paid to John for working on the project is a direct cost because it is directly related to the project's labor expenses.

17: Schedule variance is: A. the earned value minus the planned value. B. the earned value minus the actual cost. C. the planned value plus the earned value. D. the planned value plus the rate of performance.

Answer: A. the earned value minus the planned value. Feedback: Schedule variance (SV) is a measure of schedule performance in project management. It is calculated as the difference between the earned value (EV) and the planned value (PV). A positive SV indicates that the project is ahead of schedule, while a negative SV indicates that the project is behind schedule.

5: _____ is a method for determining the estimated annual costs and benefits for a project. A. Critical path analysis B. Cash flow analysis C. Present value analysis D. Requirements analysis

Answer: B. Cash flow analysis Feedback: Cash flow analysis is a financial technique used to estimate the inflow and outflow of cash for a project over a period of time, typically on an annual basis, to assess its financial viability and impact.

20: Which of the following is true of a rough order of magnitude estimate? A. It is used to allocate money into an organization's budget. B. It provides an estimate of what a project will cost. C. Its timeframe is always less than a year prior to project completion. D. It is a type of estimate that is done in the final stages of a project.

Answer: B. It provides an estimate of what a project will cost. Feedback: A rough order of magnitude (ROM) estimate provides a ballpark figure for what a project is expected to cost. It is typically used in the early stages of project planning when detailed information is not yet available.

16: Which of the following reserves allows for future situations that are unpredictable? A. Contingency reserves B. Management reserves C. Known unknowns D. Cost baseline reserves

Answer: B. Management reserves Feedback: Management reserves are funds set aside to cover unforeseen events or changes that are not predictable or cannot be planned for in advance. They provide a buffer for unknown unknowns that may impact the project.

38: _____ uses project characteristics in a mathematical model to estimate project costs. A. Rough order of magnitude estimating B. Parametric estimating C. Bottom-up estimating D. Analogous estimating

Answer: B. Parametric estimating Feedback: Parametric estimating is a technique that uses statistical relationships between historical data and other variables (project characteristics) to calculate an estimate for project costs, typically using a mathematical model.

7: Which of the following is most likely to be a reason for inaccuracies in information technology cost estimates? A. Estimates take a long time to be worked out. B. People lack estimating experience. C. Human beings are biased toward overestimation. D. Only software development provides the scope for estimates to be accurate.

Answer: B. People lack estimating experience. Feedback: Inaccurate cost estimates in information technology projects can often be attributed to a lack of experience in estimating. Inexperienced estimators may not account for all potential costs or may underestimate the complexity of tasks.

10: Which of the following is true of tangible costs? A. They cannot be calculated in monetary terms. B. They can be easily measured. C. They are difficult to quantify. D. Their examples include goodwill and prestige.

Answer: B. They can be easily measured. Feedback: Tangible costs are those that can be easily measured and quantified in monetary terms. Examples include materials, labor, and equipment costs, as opposed to intangible costs like goodwill and prestige, which are more difficult to quantify.

30: Which of the following is an input of the process of controlling costs? A. Cost forecasts B. Work performance data C. Change requests D. Scope baseline

Answer: B. Work performance data Feedback: Work performance data is an input to the process of controlling costs. It includes information about project progress and the costs incurred, which is used to monitor and manage the project budget.

26: The cost performance index (CPI): A. indicates that a project is under budget if CPI is less than one. B. can be used to estimate the projected cost of completing the project. C. indicates that the planned and actual costs are equal if CPI is more than one. D. is the ratio of earned value to planned value.

Answer: B. can be used to estimate the projected cost of completing the project. Feedback: The Cost Performance Index (CPI) is a measure of cost efficiency on a project. It is calculated as the ratio of earned value to actual costs. A CPI greater than 1 indicates that the project is under budget, while a CPI less than 1 indicates that the project is over budget.

8: 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. A. budgetary B. definitive C. rough order of magnitude D. analogous

Answer: B. definitive Feedback: A definitive estimate is a detailed and accurate cost estimate that is used as a basis for budgeting, contract awards, and performance reporting. It provides a firm basis for financial commitments and should be as precise as possible.

9: A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs. A. budgetary B. definitive C. rough order of magnitude D. final

Answer: B. definitive Feedback: A definitive estimate is used for making informed purchasing decisions and for estimating the final costs of a project with a high degree of accuracy. It is based on detailed information and thorough analysis.

13: The process of controlling costs primarily involves: A. determining the policies for project costs. B. managing changes to the project budget. C. finalising the procedures for project costs. D. determining a basis for estimates.

Answer: B. managing changes to the project budget. Feedback: The primary goal of cost control is to manage and monitor changes to the project budget, ensuring that costs are kept within the approved budget and that any deviations are addressed promptly.

37: Cost variance is: A. the planned value plus actual costs. B. the earned value minus the actual cost. C. the rate of performance minus earned value. D. the planned value minus the rate of performance.

Answer: B. the earned value minus the actual cost. Feedback: Cost variance (CV) is a measure of cost performance on a project and is calculated as the difference between the earned value (EV) and the actual cost (AC). A positive CV indicates that the project is under budget, while a negative CV indicates that it is over budget.

4: _____ helps develop an accurate projection of a project's financial expenses and benefits. A. Critical path analysis B. Fast tracking C. Life cycle costing D. Crashing

Answer: C. Life cycle costing Feedback: Life cycle costing is an approach that considers all costs associated with a project or asset over its entire life cycle, including acquisition, operation, maintenance, and disposal costs, to provide a more comprehensive understanding of its total financial impact.

27: Which of the following is true of analogous estimates? A. Their main disadvantage is that they cost more than other techniques. B. They are the only technique which do not require expert judgement. C. They are most reliable when previous projects are similar in fact with current projects. D. They use project characteristics in a mathematical model to estimate project costs.

Answer: C. They are most reliable when previous projects are similar in fact with current projects. Feedback: Analogous estimating is most reliable when the previous projects are similar in fact, not just in appearance, to the current project. This method relies on historical data and expert judgment to estimate project costs.

32: A cost estimation tool which involves estimating individual work items or activities and summing them to get a project total is known as a(n) _____ estimate. A. budgetary B. parametric C. bottom-up D. analogous

Answer: C. bottom-up Feedback: A bottom-up estimate involves estimating the costs of individual work items or activities and then summing them to get the total project cost. This method is detailed and typically more accurate than other estimating techniques.

25: One of the main outputs of the _____ process is a cost baseline. A. cost controlling B. cost estimating C. cost budgeting D. cost planning

Answer: C. cost budgeting Feedback: The cost budgeting process results in the creation of a cost baseline, which is a time-phased budget that is used to measure and monitor cost performance throughout the project.

39: Work performance information and cost forecasts are main outputs of the _____ process. A. cost budgeting B. cost estimating C. cost control D. cost pricing

Answer: C. cost control Feedback: The cost control process involves monitoring the status of the project to update the project budget and managing changes to the cost baseline. Work performance information and cost forecasts are key outputs of this process.

36: 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. A. recurring B. direct C. sunk D. intangible

Answer: C. sunk Feedback: Sunk costs are expenses that have already been incurred and cannot be recovered. In this scenario, the rent paid for the store in Baltonia is a sunk cost because it cannot be recovered after the store is closed.

21: Which of the following involves developing an approximation of the costs of resources needed to complete a project? A. Determining the budget B. Finalising the cost baseline C. Controlling costs D. Estimating costs

Answer: D. Estimating costs Feedback: Estimating costs involves developing an approximation or estimate of the costs of the resources needed to complete a project. This process is crucial for budgeting and financial planning for the project.

6: _____ includes the processes required to ensure that a project team completes a project within an approved budget. A. Project scope management B. Project quality management C. Project time management D. Project cost management

Answer: D. Project cost management Feedback: Project cost management involves the processes of planning, estimating, budgeting, financing, funding, managing, and controlling costs to ensure that a project is completed within the approved budget.

3: Indirect costs are: A. directly related to performing the project. B. those that cannot be allocated to projects. C. those that can be easily controlled by managers. D. not directly related to the products or services of a project.

Answer: D. not directly related to the products or services of a project. Feedback: Indirect costs are expenses that cannot be directly attributed to a specific project, product, or service. They are necessary for the overall operation of the company but are not tied directly to any specific cost object.

40: The budget is one of the three values of earned value management and is also known as _____. A. earned value B. actual cost C. indirect cost D. planned value

Answer: D. planned value Feedback: In earned value management (EVM), the budget at completion (BAC) is often referred to as the planned value (PV), which represents the total planned budget for the project.

14: The first step in project cost management is: A. to allocate project cost estimates to individual material resources. B. to plan how costs will be managed. C. to control project costs and monitor cost performance. D. to develop several estimates of costs for different types of resources.

Answer: B. to plan how costs will be managed. Feedback: The first step in project cost management is to plan how costs will be managed throughout the project. This involves setting cost management policies, procedures, and documentation to guide cost estimation, budgeting, and control.

19: Analogous estimates are also known as _____ estimates. A. bottom-up B. top-down C. parametric D. budgetary

Answer: B. top-down Feedback: Analogous estimates, also known as top-down estimates, use the costs of similar previous projects to estimate the cost of the current project. This approach is used when there is limited information available and a quick estimate is needed.

2: 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? A. Cost of machines to produce shoes B. Salary paid to factory workers C. Electricity used to run its factories D. Cost of leather used to manufacture shoes

Answer: C. Electricity used to run its factories Feedback: Indirect costs are expenses that are not directly tied to a specific project, product, or department. Electricity used to run factories is an example of an indirect cost because it supports the entire operation and is not tied to the production of a specific pair of shoes.

11: Which of the following is true of earned value? A. It is the actual cost plus the planned cost. B. It is based solely on the total cost estimate to be spent on an activity. C. It is an estimate of the value of the physical work actually completed. D. It is also known as the planned value.

Answer: C. It is an estimate of the value of the physical work actually completed. Feedback: Earned value is a measure used in project management to assess the value of the work completed at a given point in time, compared to the planned value and the actual cost. It provides an objective view of project performance.

12: Which of the following is true of bottom-up estimates? A. They are based on the actual cost of a previous, similar project. B. They are also known as parametric estimating. C. They are most accurate when they involve large, extensive work items. D. They are time-intensive and expensive to develop.

Answer: D. They are time-intensive and expensive to develop. Feedback: Bottom-up estimates involve estimating the costs of individual work items or activities and then aggregating them to obtain the total project cost. While this method can be very accurate, it is also time-consuming and costly due to the level of detail required.

28: A rough order of magnitude estimate can be referred to as a _____ estimate. A. definitive B. budgetary C. final D. ballpark

Answer: D. ballpark Feedback: A rough order of magnitude (ROM) estimate is also known as a ballpark estimate. It provides a broad, approximate figure for the cost or duration of a project and is typically used in the early stages of project planning.

23: Which of the following is an output of the process of controlling costs? A. Cost forecasts B. Project funding requirements C. Basis of estimates D. Scope baselines

Answer: A. Cost forecasts Feedback: Cost forecasts are an output of the cost control process. They provide projections of the expected final costs based on the current performance and any changes to the project scope or budget.

29: Profits may be defined as: A. expenses plus net income. B. costs plus revenues. C. revenues plus expenses. D. revenues minus expenditures.

Answer: D. revenues minus expenditures. Feedback: Profits are defined as the financial gain obtained when revenues exceed expenditures. It is the amount of money a company keeps after paying all its costs and expenses.

15: Which of the following types of estimate use the actual cost of a previous, similar project as the basis for estimating the cost of the current project? A. Definitive estimates B. Parametric estimates C. Bottom-up estimates D. Analogous estimates

Answer: D. Analogous estimates Feedback: Analogous estimates, also known as top-down estimates, use the actual costs of previous, similar projects as a basis for estimating the costs of the current project. This method is often used when there is limited information available for the current project.

22: _____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance. A. Determining the budget B. Finalising policies for project costs C. Controlling costs D. Estimating costs

Answer: A. Determining the budget Feedback: Determining the budget involves allocating the overall cost estimate to individual work items or activities to establish a cost baseline. This baseline is used for measuring and controlling project performance.

34: Variances are calculated by subtracting the actual cost from _____. A. earned value B. schedule variance C. planned value D. rate of performance

Answer: A. earned value Feedback: Variances in project management are calculated by subtracting the actual cost from the earned value. This calculation helps in assessing the cost performance of a project.