Project Cost Management - Ch 7

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?

Analogous estimates

_____ is a method for determining the estimated annual costs and benefits for a project.

Cash flow analysis

Which of the following is an output of the process of controlling costs?

Cost forecasts

_____ involves allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

Determining the budget

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

Which of the following involves developing an approximation of the costs of resources needed to complete a project?

Estimating costs

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

False

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

False

Analogous estimates are called activity based costing.

False

Analogous estimates are the most accurate technique to estimate costs.

False

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

False

Contingency reserves are also known as unknown unknowns.

False

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

False

If the cost performance index (CPI) is 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, it indicates that costs are less than planned.

False

Intangible costs can be easily measured in monetary terms.

False

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

False

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

False

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

False

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

False

_____ are those costs that are difficult to measure in monetary terms.

Intangible costs

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.

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.

_____ helps develop an accurate projection of a project's financial expenses and benefits.

Life cycle costing

Which of the following reserves allows for future situations that are unpredictable?

Management reserves

_____ 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 contingency reserves?

They allow for future situations that can be partially planned for.

Which of the following is true of analogous estimates?

They are most reliable when previous projects are similar in fact with current projects.

Which of the following is true of bottom-up estimates?

They are time-intensive and expensive to develop.

Which of the following is true of tangible costs?

They can be easily measured.

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

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

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

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

Which of the following is an input of the process of controlling costs?

Work performance data

A rough order of magnitude estimate can be referred to as a _____ estimate.

ballpark

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.

bottom-up

A cost estimation tool which is used to allocate money into an organization's budget is known as a _____ estimate.

budgetary

The cost performance index (CPI):

can be used to estimate the projected cost of completing the project.

One of the main outputs of the _____ process is a cost baseline.

cost budgeting

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

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(n) _____ estimate and as accurate as possible.

definitive

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

Variances are calculated by subtracting the actual cost from _____.

earned value

The process of controlling costs primarily involves:

managing changes to the project budget.

Indirect costs are:

not directly related to the products or services of a project.

The budget is one of the three values of earned value management and is also known as _____.

planned value

Profits may be defined as:

revenues minus expenditures.

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.

sunk

Cost variance is:

the earned value minus the actual cost.

Schedule variance is:

the earned value minus the planned value.

The first step in project cost management is:

to plan how costs will be managed.

Analogous estimates are also known as _____ estimates.

top-down