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PM > Chp 7 > Flashcards

Chp 7 Flashcards

1
Q

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

A

False;

Actual Costs exceed actual costs

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2
Q

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

A

False;

Cost Management Plan not a change request

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3
Q

IT project managers must be able to present and discuss project information both in financial and technical terms.

A

True

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4
Q

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

A

True

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5
Q

Intangible costs can be easily measured in monetary terms.

A

False;

difficult to measure

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6
Q

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

A

False;

Should not include sunk costs

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7
Q

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

A

False;

DIRECT not indirect

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8
Q

If an important supplier goes out of business, management reserves can be set aside to cover the resulting costs.

A

True

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9
Q

Contingency reserves are also known as unknown unknowns.

A

False;

known Unknowns

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10
Q

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

A

True

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11
Q

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

A

False;

Definitive estimate

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12
Q

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

A

False;

1-2 years prior to completion

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13
Q

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

A

True

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14
Q

Estimates should become more accurate as time progresses

A

True

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15
Q

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

A

True

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16
Q

Analogous estimates are called activity-based costing.

A

False;

top-down estimates

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17
Q

Analogous estimates are the most accurate technique to estimate costs

A

False;

less accurate

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18
Q

In a bottom-up estimate, the size of the individual work items is one of the factors that drives the accuracy of the estimates.

A

True

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19
Q

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

A

True

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20
Q

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

A

True

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21
Q

It is important for project managers to understand that every cost estimate is unique

A

True

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22
Q

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

A

True

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23
Q

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

A

True

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24
Q

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

A

True

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25
Q

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

A

False;

work costs less than planned

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26
Q

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

A

False;

lesser, not longer

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27
Q

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

A

False;

Over not under

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28
Q

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

A

True

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29
Q

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.

A

False;

costs are equal to or more than

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30
Q

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

A

True

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31
Q

_____ includes the processes required to ensure that a project team completes a project within an approved budget.

A

Project cost management

32
Q

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

A

Estimating costs

33
Q

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

A

Determining the budget

34
Q

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

A

cost budgeting

35
Q

The process of controlling costs primarily involves:

A

managing changes to the project budget.

36
Q

Work performance information and cost forecasts are main outputs of the _____ process.

A

cost control

37
Q

Profits may be defined as:

A

revenues minus expenditures.

38
Q

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

A

Life cycle costing

39
Q

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

A

Cash flow analysis

40
Q

Which of the following is true of tangible costs?

A

They can be easily measured.

41
Q

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

A

Intangible costs

42
Q

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.

A

direct

43
Q

Indirect costs are:

A

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

44
Q

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?

A

Electricity used to run its factories

45
Q

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.

A

sunk

46
Q

Which of the following is true of contingency reserves?

A

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

47
Q

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

A

Management reserves

48
Q

The first step in project cost management is:

A

to plan how costs will be managed.

49
Q

Which of the following is true of a rough order of magnitude estimate?

A

It provides an estimate of what a project will cost.

50
Q

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

A

ballpark

51
Q

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

A

budgetary

52
Q

A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs.

A

definitive

53
Q

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?

A

Analogous estimates

54
Q

Analogous estimates are also known as _____ estimates.

A

top-down

55
Q

Which of the following is true of analogous estimates?

A

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

56
Q

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.

A

bottom-up

57
Q

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

A

They are time-intensive and expensive to develop.

58
Q

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

A

Parametric estimating

59
Q

Which of the following is most likely to be a reason for inaccuracies in information technology cost estimates?

A

People lack estimating experience.

60
Q

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.

A

definitive

61
Q

The main goal of the _____ process is to produce a cost baseline for measuring project performance and project funding requirements.

A

cost budgeting

62
Q

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

A

Cost forecasts

63
Q

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

A

Work performance data

64
Q

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

A

planned value

65
Q

Which of the following is true of earned value?

A

It is an estimate of the value of the physical work actually completed.

66
Q

Variances are calculated by subtracting the actual cost from _____.

A

earned value

67
Q

Cost variance is:

A

the earned value minus the actual cost.

68
Q

Schedule variance is:

A

the earned value minus the planned value.

69
Q

The cost performance index (CPI):

A

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

70
Q

Which of the following is true of the schedule performance index (SPI)?

A

It can be used to estimate the projected time to complete the project.

71
Q

Earned Value (EV)

A

EV =PV to date * RatePerformance

72
Q

Cost Variance (CV)

A

CV = EV - ActualCost

73
Q

Schedule Variance (SV)

A

SV = EV - PlannedValue

74
Q

Cost Performance Index (CPI)

A

CPI = EV / ActualCost

75
Q

Schedule Performance Index (SPI)

A

SPI = EV / PlannedValue

76
Q

Estimate at Completion (EAC)

A

EAC = BudgetAtCompletion / CPI

77
Q

Estimated time to complete

A

Original time Estimate / SPI

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