Finance Quiz 10 Question
- "Unknown unknowns" are unexpected events which can occur when the project is underway. All of the following accurately describe an implication associated with unknown unknowns EXCEPT:
Ans. a. They are usually discovered during risk identification
- Costs that repeat as project work continues such as the cost of writing code or laying bricks are appropriately classified as:
Ans. a. recurring costs
- The component of the project management plan that describes how project costs will be planned, structured and controlled is called the project financial plan.
- A contingency reserve is money assigned to the project and allocated for identified risks for which contingent responses are developed.
- Typically, expedited costs are preferred over regular costs.
- Value engineering is aimed at increasing the value or productivity of a work element while minimizing the cost. Ans. True
- The project scope does not come into play when considering fixed and variable cost choices. Ans. False
- Analogous estimating is the most detailed, time consuming and accurate way to estimate.
- Which of the following terms best describes extra money in the project budget to be used if necessary - usually if a risk event occurs?
Ans. a. reserve
- Which estimating technique decomposes the work into lower, more detailed pieces, preferably the lowest level of WBS work elements, for which estimates are prepared and then aggregates them into a total quantity for the project?
Ans. a. bottom-up estimating
- Plan Cost Management is the process to determine how to plan, estimate, and control project costs. Ans. True
- What type of cost is incurred when a project must be conducted faster than normal, and overtime for workers and / or extra charges for rapid delivery from suppliers are necessary?
Ans. d. expedited costs
- Which estimating technique uses a statistical relationship to calculate cost or duration based on historical data and other project parameters?
Ans. a. analogous estimating
- Inflating the value of future revenue and cost streams to account for the time value of money enables better project decisions.
- Which estimating technique uses a statistical relationship between historical data and other variables (e.g., square footage in construction, lines of code in software development) to calculate an estimate for scope, cost and duration?
Ans. a. parametric estimating
- A project manager needs to ensure that the cumulative amount of cash coming into the project either from internal budgeting or from customer payments meets or exceeds the demands for paying cash out.
- Most projects will employ bottom-up estimating at some point to serve as a basis for estimating cash flow needs and for controlling the project.
- The documentation of a project cost estimate generally requires substantial supporting detail to include all of these EXCEPT:
Ans. c. management reserve needs
- Describe analogous, parametric and bottom-up estimating, and briefly discuss the advantages and disadvantages of each method.
Ans. 1. Analogous Estimating: It's the act of using previous former projects in estimating the length and cost of a current project. It uses a comparison of projects, past and present, to come to a decision. The more data available of past projects, the better the estimate will be. Advantages:
- It is useful in the initial stages of the project when lesser details are known and one can refer to past details.
- It is not a time-consuming process when it comes to estimation.
- It is very simple and easy to follow.
- The success rate of the organization can be expected to be high since it is based on the organization's historical data.
- It can be used to estimate individual tasks as well so it saves time.
- The main and only disadvantage is the estimation is not always accurate
- Parametric Estimating: It is the estimation that uses the relationship between the variables to calculate the cost and duration. It is a more accurate technique to estimate cost. It takes into consideration the unit cost or duration identity and the number of units required. Advantages:
- Higher accuracy than other estimation methods
- It has a lesser impact on the project and doesn't interfere
- It is a simple and quick method that produces quantitative results
- It's a very time-consuming and difficult method.
- It requires multiple math formulas making it difficult to adjust the differences between projects.
- It has a higher cost of estimate as compared to the other methods.
- Bottom-Up Estimating: Bottom-Up Estimating is when the project is broken down into individual tasks to be completed by the team members and combining these tasks into an overall project estimate. It is when everyone involved in the project work together.
- The need to document all the tasks and requirements shows the bigger picture to scale the feasibility.
- This approach leads to greater accuracy as it takes each component of the project into consideration.
- This method boosts company and employee morale and teamwork as everyone is involved.
- There is a deeper understanding of company goals.
- The requirement of low-level components at the starts makes this a time-consuming process.
- It is a very costly process as each component has to be broken down and this isn't done for free.
- Not everyone has the same budget when working individually and can go overboard.
- Projects often include indirect costs that are necessary to keep the organization running, but are not associated with one specific project. Which of the following items are most typically considered to be indirect costs?
Ans. d. executive salaries, utilities and insurance
- All of the following items describe an aspect of life cycle costing EXCEPT:
Ans. b. Life cycle cost only includes the project cost from initiating through closing