Project Cost Management – Ch 7 (True-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

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

True

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

True

Intangible costs can be easily measured in monetary terms.

False

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

False

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

False

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

True

Contingency reserves are also known as unknown unknowns.

False

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

True

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

False

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

False

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

True

Estimates should become more accurate as time progresses.

True

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

True

Analogous estimates are called activity based costing.

False

Analogous estimates are the most accurate technique to estimate costs.

False

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

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

True

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

True

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

True

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

True

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

True

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

True

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

False

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

False

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

False

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

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

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

True