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Chapter 7 Content

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
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
Budgetary estimates are made even before a project is officially started.
False
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 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
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.
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
_____ 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
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.
Sunk
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.
Ballpark
A cost estimation tool which is used to allocate money into an organization’s budget is known as a _____ estimate.
Buggetary
A _____ estimate is used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs.
Definitive
Analogous estimates are also known as _____ estimates
Top-Down
_____ 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
Definitive
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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