Chapter 7 Content

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


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


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


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


Intangible costs can be easily measured in monetary terms.


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


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


Contingency reserves are also known as unknown unknowns.


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


Estimates should become more accurate as time progresses.


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


Analogous estimates are the most accurate technique to estimate costs.


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


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


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


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


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


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


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


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


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

Project Cost Management

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

Estimating Costs

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

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

Life-cycle costing

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

Intangible Coata

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 costs are:

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

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 locations

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.


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

The first step in project cost management is:

Develop estimates

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


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


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


Analogous estimates are also known as _____ estimates


_____ 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?

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


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

Which of the following is true of earned value?

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

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