ch 7
A negative schedule variance means that it took lesser than planned to perform the work.
false, a negative schedule variance means that it tool 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.
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 continue, one should not include sunk costs.
IT project managers must be able to present and discuss project information both in financial and technical terms.
true
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.
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
The budget is one of the three values of earned value management and is also known as ______________
planned value
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
If an important supplier goes out of business, management reserves can be set aside to cover the resulting costs.
true
The cost performance index (CPI):
can be used to estimate the projected cost of completing the project
Indirect costs are:
not directly related to the products or services of a project.
Estimates should become more accurate as time progresses.
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
Which of the following types of estimates use the actual cost of a previous, similar project as the basis for estimating the cost of the current project?
Analogous estimates
Which of the following is true of earned value?
It is an estimate of the value of the physical work actually completed.
Which of the following is true of a rough order of magnitude estimate?
It provides an estimate of what a project will cost
Which of the following reserves allows for future situations that are unpredictable?
Management reserves
Which of the following is true of bottom-up estimates?
They are time-intensive and expensive to develop
A cost estimation tool which involves estimating individual work items or activities and summing them to get a project total is known as a _________________ estimate.
bottom-up
A cost estimation tool which is used to allocate money into an organization's budget is known as a _______________ estimate.
budgetary
______________ is a method for determining the estimated annual costs and benefits for a project.
cash flow analysis
One of the main outputs of the ______________ process is a cost baseline.
cost budgeting
Which of the following is an output of the process of controlling costs?
cost forecasts
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 ________________
definitive
_____________ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.
determining the budget
Variances are calculated by subtracting the actual cost from _____________
earned value
Which of the following involves developing an approximation of the costs of resources needed to compete a project?
estimating costs
A budgetary estimate is the most accurate of the three types of estimates
false
_____________ helps develop an accurate projection of a project's financial expenses and benefits.
life cycle costing.
The process of controlling costs primarily involves:
managing changes to the project budget
____________________ uses project characteristics in a mathematical model to estimate project costs.
parametric estimating
Which of the following is most likely to be a reason for inaccuracies in information technology cost estimates?
people lack estimating experience
_______________ includes the processes required to ensure that a project team completes a project within an approved budget.
project cost management
Which of the following is true of tangible costs?
they can be easily measured
The first step in project cost management is:
to plan how costs will be managed
Analogous estimates are also known as _______________ estimates.
top-down
Analogous estimates use the most accurate technique to estimate costs.
false
Cost variance is:
the earned value minus the actual cost
Which of the following is an input of the process of controlling costs?
work performance data
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"
Profits may be defined as:
revenues minus expenditures
Schedule variance is:
the earned value minus the planned value
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 factories. Indirect costs are not directly related to the products or services of the project, but are indirectly related to performing the project. For example, indirect costs would include the cost of electricity, paper towels, and other necessities in a large building that houses 1,000 employees who work on many projects.
The primary output of the planning cost management process is a change request
false. The main output of the planning cost management 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.
Which of the following is true of the schedule performance index (SPI)?
It can be used to estimate the projected time to complete the project
The main goal of the _______________ process is to produce a cost baseline for measuring project performance and project funding requirements.
cost budgeting
Work performance information and cost forecasts are main outputs of the _________ process.
cost control
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, Direct costs can be directly related to creating the products and services of a project. For instance, direct costs include the salaries of people working full time on a project.
If cost variance is positive number, it means that performing the work costs more than planned.
false
Intangible costs can be easily measured in monetary terms.
false
It is important for project managers to focus on indirect costs becasue they can be easily controlled
false
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.
____________ are those costs that are difficult to measure in monetary terms
intangible
Which of the following is true of analogous estimates?
they are most reliable when previous projects are similar in fact with current projects
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
A rough order of magnitude estimate can be referred to as a ________________ estimate
ballpark
Budgetary estimates are made even before a project is officially started.
false. Budgetary estimates are made one to two years prior to project completion.
Which of the following is true of contingency reserves?
they allow for future situations that can be partially planned for,
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
In a bottom-up estiamte, the size of the individual work items is one of the factors that drives the accuracy of the estimates.
true
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.
