Chapter 4 Project management
Which of the following is not true regarding bottom-up budgeting?
The method tends to be inaccurate in the detailed tasks.
A task is expected to take 20 hours of labor at $25 per hour. The required material cost is $500 and the organization charges 30% of direct labor for overhead. The total task cost is
$1,150
There is a 30 percent chance that a new product development project will result in sales of $500,000 and a 70 percent chance that the project will result in sales of $100,000. What is the expected value of this project?
$220,000
The first unit required 6 hours. If the industry uses a 90 percent learning rate, how long should the fourth unit take
4.86 hours
The first unit requires 10 hours to complete. If the industry uses an 80 percent learning rate, how long should the third unit take?
7.02 hours
Reason for cost uncertainty in projects include
All of the following
Activity budgets show expenses by task and expected time period of the expenditure.
False
As a project unfolds, the cost uncertainty increases as the project moves towards completion.
False
Because project budgeting is for a special case and the organization's budgeting process is for routine work, the project manager need not be familiar with the organization's accounting system.
False
Bottom-up budgets are usually more accurate in the detailed tasks
False
By very careful planning, a project manager can do away with cost uncertainty
False
Contingency planning is generally begun at that point in time when an organization finds itself in serious financial trouble
False
For projects with S-shaped life cycles, top-down budgeting is most likely unacceptable.
False
Learning curve theory states that performance of labor per unit will improve by a percentage each time production increases by the same percentage.
False
Mechanical tasks typically have higher learning rates than more mental tasks.
False
Organizational tradition has little or no impact on the firm's project budgeting.
False
Overhead and indirect charges should not be assigned to a project
False
Qualitative risk analysis is not as important to a project's planning because there are not many qualitative concerns in project management.
False
Scenario analysis is not a popular technique for identifying risks
False
The PMI does not devote much coverage to risk management in the PMBOK
False
The project manager recognizes an expense when an invoice is actually paid.
False
Which of the following is not true regarding top-down budgeting?
The overall budget cost is generally not very accurate.
A budget is a plan for allocating resources
True
A budget is a plan for allocating resources to project activities
True
A disaster is an event that may have an extraordinarily high cost if it occurs, but has a very low probability of occurring
True
A key advantage of top-down budgeting is that the overall budget costs can be estimated quite accurately
True
Budget cuts are usually disastrous to an exponential life-cycle project
True
Budgeting a project is often more difficult than budgeting routine activities.
True
A problem with bottom-up budgeting is
individual team members overstate their budget needs
A requirement of top-down budgeting is:
none of the above
The name given to the budget process that aggregates income and expenditures across projects is:
program-oriented budget
The best approach to handling change in projects is to accept the negative change and take a loss on the project
False
The project's budget is merely the sum of its resource costs.
False
The result of game theory analysis is a Risk Priority Number
False
There is no way other than guessing to estimate the impact of learning on a project's task
False
Top-down budgeting typically results in better acceptance of the budget
False
Traditional organizational budgets are task-oriented, rather than activity-oriented.
False
With top-down budgeting, overlooking a small but important task can often cause a serious budgetary problem.
False
Calculating the Tracking Signal can not only reveal if estimates are biased, it can also tell how severe the bias is
True
Expected value is a tool for risk analysis.
True
Individual elements of project budgets are generally more accurate in bottom-up budgeting
True
Learning curve theory states that performance of labor per unit will improve by a fixed percentage each time production doubles
True
Learning curves can be used to help improve cost estimates
True
Most organizations use top-down budgeting
True
Organizations can use both top-down and bottom-up budgeting
True
Project budget is nothing more than the project plan, based on the WBS, expressed in monetary terms
True
Random errors will tend to cancel out.
True
The project budget acts as a project control
True
Tracking signals can be used to identify bias in your estimates
True
After major risk are identified which of the following data should NOT be obtained for analysis
the person responsible for each outcome
Which of the following statements is not true about a firm and its project accounting?
the project manager must rely on the accounting department to make special allowances for his/her project
Why is it necessary to consider the learning curve of resources on a project?
to estimate labor costs properly
The budgeting approach based on the collective judgments of top and middle managers is called:
top-down budgeting
