SPM Chapter 7

Any new technology or business process is untested and has inherent risks.

True

Cost budgeting provides information for project funding requirements.

True

Estimates are usually done at various stages of a project and should become more accurate as time progresses.

True

If a project manager gets sick for two weeks or an important supplier goes out of business, management reserve could be set aside to cover the resulting costs.

True

Many projects that are started never finish because of cost management problems.

True

Many projects, particularly information technology projects, do not have good planning information, so tracking performance against a plan might produce misleading information.

True

Most organizations have a well-established process for preparing budgets.

True

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

True

ROM estimates can be referred to as a ballpark estimate, a guesstimate, a swag, or a broad gauge.

True

____________________ and SPI less than one or less than 100 percent indicate problems.

CPI - Cost performance index - Cost performance index (CPI)

____ is a method for determining the estimated annual costs and benefits for a project and the resulting annual cash flow. a. Life cycle costing c. Cost estimating b. Profit margin analysis d. Cash flow analysis

Cash flow analysis

The WBS is not a required input to the cost budgeting process.

False

The people who develop software cost estimates often have a great deal of experience with cost estimation.

False

There does not need to be a change control system to define procedures for changing the cost baseline.

False

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

False

When developing an estimate for a large software project, estimates cannot be made before clear system requirements have been produced.

False

The cost management plan is part of the overall project management plan.

True

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

True

When justifying investments in new information systems and technology, the focus should only be on revenues or expenses.

False

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

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

A(n) ____________________ is a document that describes how the organization will manage cost variances on the project.

cost management plan

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 complexity of the data involved, and so on. a. analogous cost estimate c. bottom-up estimate b. parametric model d. reserve analysis

parametric model

In general, ____________________ numbers for cost and schedule variance indicate problems in those areas.

negative

____ involve estimating individual work items or activities and summing them to get a project total. a. Actual estimates c. Bottom-up estimates b. Parametric estimates d. Analogous estimates

Bottom-up estimates

____ is the earned value minus the actual cost. a. SV c. CPI b. CV d. SPI

CV

____ is a project performance measurement technique that integrates scope, time, and cost data. a. Cost baseline c. Constructive cost modeling b. Earned value management d. Parametric modeling

Earned value management

____________________ considers the total cost of ownership, or development plus support costs, for a project.

Life cycle costing

____ is the earned value minus the planned value. a. SV c. CPI b. CV d. SPI

SV

____ should be forgotten. a. Sunk costs c. Direct costs b. Indirect costs d. Intangible costs

Sunk costs

Every cost estimate is unique.

True

A(n) ____________________ is the original project plan plus approved changes.

baseline

The main outputs of the ____________________ process are activity cost estimates, basis of estimates, and project document updates.

cost estimating

A ____ is done very early in a project or even before a project is officially started. a. budgetary estimate c. rough order of magnitude estimate b. definitive estimate d. final estimate

rough order of magnitude estimate

A ____ provides an estimate of what a project will cost. a. budgetary estimate c. rough order of magnitude estimate b. definitive estimate d. final estimate

rough order of magnitude estimate

A large percentage of total project costs are often labor costs.

True

Preparing cost estimates is a job for accountants.

False

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. a. 1 c. 11 b. 5 d. 15

1 COMPLETION

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. a. 13-14 c. 33-34 b. 23-24 d. 43-44

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. a. 28 c. 56 b. 43 d. 73

56

____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance. a. Determining the budget c. Controlling costs b. Consolidation of costs d. Estimating costs

A

The ____ is the total direct and indirect costs incurred in accomplishing work on an activity during a given period. a. AC c. RP b. EV d. PV

AC

The ____ is the ratio of earned value to planned value and can be used to estimate the projected time to complete the project. a. SV c. CPI b. CV d. SPI

CPI

____ use the actual cost of a previous, similar project as the basis for estimating the cost of the current project. a. Actual estimates c. Bottom-up estimates b. Parametric estimates d. Analogous estimates

Analogous estimates

The ____ is the ratio of earned value to actual cost and can be used to estimate the projected cost of completing the project. a. SV c. CPI b. CV d. SPI

C

____ allow for future situations that may be partially planned for. a. Contingency reserves c. Unknown unknowns b. Management reserves d. Direct reserves

Contingency reserves

The ____ is an estimate of what it will cost to complete the project based on performance to date. a. CPI c. EAC b. SV d. SPI

EAC

The cost performance index can be used to calculate the ____________________.

EAC - estimate at completion - estimate at completion (EAC)

The ____ is an estimate of the value of the physical work actually completed. a. AC c. RP b. EV d. PV

EV

Variances are calculated by subtracting the actual cost or planned value from ____. a. EV c. PV b. AC d. RP

EV

____ involves developing an approximation or estimate of the costs of the resources needed to complete a project. a. Determining the budget c. Controlling costs b. Consolidation of costs d. Estimating costs

Estimating costs

Parametric models are least reliable when historical information was used to create the model.

False

A definitive estimate should be the least accurate of the three types of estimates.

False

Although information technology projects have a poor track record in meeting project goals, they have a good track record in meeting budget goals.

False

Databases are a common tool for cost estimating, cost budgeting, and cost control.

False

Direct costs cannot be directly attributed to a certain project.

False

If cost variance is a positive number, it means that performing the work cost more than planned.

False

If the cost performance index is less than one or less than 100 percent, the project is under budget.

False

In an earned value chart, when the actual cost line is right on or above the earned value line, costs are less than or equal to planned.

False

Learning curve theory does not apply to the amount of time it takes to complete some tasks.

False

Organizations have a history of spending too much money in the early phases of information technology projects.

False

____ are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project. a. Intangible costs c. Direct costs b. Tangible costs d. Indirect costs

Indirect costs

____________________ costs or benefits are costs or benefits that are difficult to measure in monetary terms.

Intangible

____________________ costs are often much higher for contractors.

Labor

____________________ states that when many items are produced repetitively, the unit cost of those items decreases in a regular pattern as more units are produced.

Learning curve theory

____ helps you develop an accurate projection of a project's financial costs and benefits. a. Profit cycle costing c. Life cycle costing b. Financial costing d. Profit margin costing

Life cycle costing

____________________ allows you to see a big-picture view of the cost of a project throughout its life cycle.

Life cycle costing

____ allow for future situations that are unpredictable. a. Contingency reserves c. Known unknowns b. Management reserves d. Indirect reserves

Management reserves

The ____ is that portion of the approved total cost estimate planned to be spent on an activity during a given period. a. AC c. RP b. EV d. PV

PV

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

Parametric modeling

____ is the ratio of revenues to profits. a. Profit c. Cost structure b. Profit margin d. Cost margin

Profit margin

____________________ are revenues minus expenditures.

Profits

____________________ has many cost management features to help you enter budgeted costs, set a baseline, enter actuals, calculate variances, and run various cost reports.

Project 2007 - Microsoft Project - Microsoft Project 2007

____ includes the processes required to ensure that a project team completes a project within an approved budget. a. Cost budgeting c. Cost control b. Cost estimating d. Project cost management

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. a. Financial mangers c. Budget managers b. Project managers d. System managers

Project managers

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. a. AC c. RP b. EV d. PV

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 cost and how long it will take to finish the project based on performance to date.

SPI - schedule performance index - schedule performance index (SPI)

____________________ cost is money that has been spent in the past.

Sunk

____ are those costs that an organization can easily measure in dollars. a. Intangible costs c. Tangible costs b. Direct costs d. Indirect costs

Tangible costs

It is helpful to analyze the total dollar value as well as the percentage of the total amount for each major ____________________ category.

WBS - work breakdown structure - work breakdown structure (WBS)

A ____ is used to allocate money into an organization's budget. a. budgetary estimate c. rough order of magnitude estimate b. definitive estimate d. final estimate

budgetary estimate

The project management plan, project funding requirements, work performance data, and organizational process assets are inputs for the process of ____. a. controlling costs c. consolidating costs b. budgeting costs d. estimating costs

controlling costs

A ____ is a time-phased budget that project managers use to measure and monitor cost performance. a. budget baseline c. cost baseline b. ledger d. cost line

cost baseline

In addition to providing input for budgetary estimates, cost budgeting provides a(n) ____________________.

cost baseline

The main goal of the ____ process is to produce a cost baseline for measuring project performance and project funding requirements. a. cost budgeting c. cost control b. cost consolidation d. cost estimating

cost budgeting

A ____ is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs. a. budgetary estimate c. rough order of magnitude estimate b. definitive estimate d. final estimate

definitive estimate

If the cost estimate will be the basis for contract awards and performance reporting, it should be a ____ and as accurate as possible. a. budgetary estimate c. rough order of magnitude estimate b. definitive estimate d. final estimate

definitive estimate

Project managers should focus on ____, since they can control them. a. sunk costs c. direct costs b. indirect costs d. intangible costs

direct costs

It's important for the team to ____________________ assumptions they made when developing the cost baseline and have several experts review it.

document

Since organizations depend on reliable information technology, there are also huge costs associated with ____. a. work time c. uptime b. technical planning d. downtime

downtime

Information technology project managers need to be able to present and discuss project information in ____________________ terms as well as in technical terms.

financial

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. a. three c. five b. four d. six

four

Many organizations now collect and control an entire suite of projects or investments as one set of interrelated activities in one place, called a(n) ____________________.

portfolio

Using good ____________________ can change the false perception that costs grow and failures are to be expected.

project cost management