BUS 395 CH 7 T/F

A budgetary estimate is the most accurate of the three types of estimates.

False - A definitive estimate provides an accurate estimate of project costs. It provides details for purchases and estimates actual costs.

A negative schedule variance means that it took less time than planned to perform the work.

False - A negative schedule variance means that it took longer than planned to perform the work, and a positive schedule variance means that the work took less time than planned to perform.

Analogous estimates are called activity-based costing.

False - Analogous estimates are also called top-down estimates. Such estimates use the actual cost of a previous, similar project as the basis for estimating the cost of the current project.

Analogous estimates are the most accurate technique to estimate costs.

False - Analogous estimates requires a good deal of expert judgment and is generally less costly than other techniques. However, it is also less accurate.

Contingency reserves are also known as unknown unknowns.

False - Contingency reserves allow for future situations that may be partially planned for. They are sometimes called known unknowns.

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

False - Cost variance (CV) is the earned value minus the actual cost. If cost variance is a negative number, it means that performing the work costs more than planned. If cost variance is a positive number, performing the work costs less than planned.

It is important for project managers to focus on indirect costs because they can be easily controlled.

False - Direct costs can be directly related to creating the products and services of the project. Project managers should focus on direct costs because they can be controlled.

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

False - If the CPI is less than one or less than 100 percent, the project is over budget. On the other hand, if the CPI is greater than one or more than 100 percent, the project is under budget.

Intangible costs can be easily measured in monetary terms.

False - Intangible costs or benefits are difficult to measure in monetary terms. Conversely, tangible costs or benefits can easily be measured in dollars.

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

False - Overrun is the additional percentage or dollar amount by which actual costs exceed estimates.

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

False - Sunk cost is money that has been spent in the past. When deciding what projects to invest in or continue, one should not include sunk costs.

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

False - The main output of the planning cost management process process is a cost management plan. Planning cost management involves determining the policies, procedures, and documentation that will be used for planning, executing, and controlling project cost.

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

False - Viewing earned value information in chart form helps in visualizing how a project is performing. If the actual cost line is always on or above the earned value line, it indicates that costs are equal to or more than planned.

A cost management plan can include organizational procedures links, control thresholds, and process descriptions.

True

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

True

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

True

Definitive estimates are made one year or less prior to project completion.

True

Determining the budget involves allocating the project cost estimate to individual work items over time.

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

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

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

True

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

True

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

True

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

True

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

True

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

True

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

True