Deck 7: Determining Costs, Budget, and Earned Value

Question 1

It is important to manage the cash flow on a project.

Answer 1

True

Question 2

Labor costs in the project costs estimate are the estimated costs for the various types or classifications of and are based on the estimated work time not necessarily the same as the activity estimated duration) and the dollar labor rate for each.

A)people who are expected to work on the project
B)people, even if they are not directly assigned to the project
C)overhead and direct expenses
D)subcontractors

Answer 2

A

Question 3

Historical data can be used as a guide on the current project.

Answer 3

True

Question 4

Committed costs are also known as discharged or postponed costs.

Question 5

Materials costs in the project costs estimate are the estimated costs of materials that the project team or contractor

A)want to have in supply in the office.
B)needs even if not for this particular project.
C)needs to purchase for the project.
D)might want to use on the project.

Question 6

The key to effective cost control is waiting to address negative cost variances and cost inefficiencies after they are identified.

Question 7

Cumulative actual cost CAC) should be calculated to compare to the cumulative budgeted cost CBC).

Question 8

Based on analysis of actual cost it is possible to forecast what the total costs will be at the completion of the project or work package.

Question 9

In many projects, large dollar amounts are expended for materials or services subcontractors, consultants) that are used over a period of time longer than one cost reporting period.

Question 10

The worst scenario from the contractor's point of view is to have the customer make only one payment at the end of the project.

Question 11

When the CPI goes below 1.0 or gradually gets smaller, corrective action should not be taken, the project is performing well.

Question 12

The total project cost is often estimated during the phase of the project or when the project charter or a proposal is prepared

A)initiating
B)planning
C)performing
D)closing

Question 13

Cost estimates should be unreasonable and excessive.

Question 14

Equipment costs in the project costs estimate are for equipment

A)that the organization wants to have.
B)that is the latest upgrade, even if not needed for the project.
C)that must be purchased as part of the project.
D)needed by others in the organization that may not be assigned to the project.

Question 15

The percent complete estimate for a work package is subjective and requires an underestimated guess compared to the scope of the work package.

Question 16

If you put off corrective actions until some point in the distant future, the negative cost variance may deteriorate in the project.

Question 17

The key to managing cash flow is to ensure that cash comes in faster than it goes out.

Question 18

In many cases, there will be a tradeoff, reducing cost variances will involve a reduction in project scope or a delay in the project schedule.

Question 19

It is good practice to have the person who will be responsible for the costs associated with the work make the cost estimates.

Question 20

The key to effective cost control is to analyze cost performance on a regular and timely basis.

Question 21

It may be easier to estimate the costs for , but as the project progresses, the project team can progressively elaborate the estimated costs as more information is known or becomes clear to allow for more accurate estimated costs.

A)near-term activities
B)activities near the end of the project
C)new activities with new procedures
D)activities with long durations

Question 22

Large projects would have charge codes for the work package numbers to

A)have a place for other projects to charge expenses.
B)determine how the actual costs compare to the planned costs.
C)have resources be able to determine what tasks they should complete.
D)allow for cutting of the budget for the activities if need to cut the budget.

Question 23

Allocating total project costs for the various elements to the appropriate work packages will establish

A)the committed costs for the work package.
B)the anticipated expense for the work package.
C)how to apply resources to the work package.
D)a total budgeted cost TBC) for each work package.

Question 24

There are two approaches to establishing the total budgeted cost for each work package:

A)top-down and bottom-up.
B)horizontal and vertical.
C)committed and actual.
D)aggregated and disaggregated.

Question 25

The is the amount that was budgeted to accomplish the work that was scheduled to be performed up to that point in time.

A)total budgeted cost TBC)
B)cumulative actual cost CAC)
C)cumulative budgeted cost CBC)
D)cumulative earned value CEV)

Question 26

To keep track of , it's necessary to set up a system to collect, on a regular and timely basis, data on funds actually expended.

A)budgeted cost of work scheduled
B)planned cost of the project
C)actual cost on a project
D)budgeted cost of work performed

Question 27

Costs related to are for outsourced work when the project teams or contractors do not have the expertise or resources to do certain project tasks.

A)benefactors and suppliers
B)stakeholders
C)reserve and withholding
D)subcontractors and consultants

Question 28

Once a total budgeted cost has been established for each work package, the second step in the project budgeting process is to

A)assign each TBC at the start of its work package.
B)assign each TBC at the end of its work package.
C)distribute each TBC over the project by dividing the total by the number of work packages and assigning that amount to each.
D)distribute each TBC over the duration of its work package.

Question 29

At the beginning of the project, it may not be possible to estimate the costs for all activities with a level of confidence regarding their accuracy.This is especially true for

A)projects with a short term.
B)longer-term projects.
C)projects that are similar to ones completed by the organization before.
D)projects with activities that are serially related.

Question 30

The for the entire project or each work package provides a baseline against which actual cost and work performance can be compared at any time during the project.

A)total budgeted cost TBC)
B)cumulative budgeted cost CBC)
C)cumulative earned value CEV)
D)cumulative actual cost CAC)

Question 31

The project cost estimate is allocated to

A)the various work packages in the project work breakdown structure.
B)the resources in the project.
C)the committed costs in the project.
D)the stakeholders.

Question 32

Contingency costs in the project costs estimate, also referred to as , are to cover unexpected situations that may come up during the project, such as items that may have been overlooked when the initial project scope was defined, activities that may have to be redone because they may not work the first time redesigns), or a high probability or high impact risk that may occur.

A)auxiliary funds
B)withholding
C)reserves
D)capital funds

Question 33

Facilities costs in the project costs estimate are for

A)general facilities for the project organization.
B)special facilities or additional space for the project team.
C)special facilities or additional space for the organization where other projects will be in progress.
D)storage of materials even if not for the project.

Question 34

A cost is determined for each period, based on when the activities that make up the work package are scheduled to be performed, to create

A)the time-phased budget.
B)the actual costs of the project.
C)an example budget.
D)an adjusted budget.

Question 35

It is important to use the as the standard against which actual cost is compared.

A)cumulative budget
B)total budget
C)budget at completion
D)phased budget

Question 36

Committed costs need to be treated in a special way so that the system

A)audits the amounts assigned.
B)periodically assigns a portion of their total cost to actual cost.
C)enters the amount of the cost one time at the end of the project.
D)enters the amount of the cost one time at the beginning of the project.

Question 37

The budget for each work package is

A)charged completely on the first day of the work package.
B)charged at the end of the project.
C)distributed over the duration of the work package.
D)charged completely on the last day of the work package.

Question 38

Often, the sum of the initial estimated costs is greater than the amount of funds budgeted by the sponsor.What should be done to arrive at an acceptable budget amount?

A)Cut the cost of the highest priced activity in half until the budget is reached.
B)Trade experienced and efficient resources for less experienced and less efficient resources.
C)Revise the budget expecting that several iterations may need to be made to reduce the costs.
D)Extend the scope of the project.

Question 39

Travel costs in the project costs estimate are for

A)travel other than local travel) required during the project.
B)all travel by the organization.
C)travel costs for local meetings.
D)travel for conferences that may not be related to the project.

Question 40

When the budgets for all the work packages are summed,

A)they should exceed the amount of funds available.
B)they cannot exceed the total project budgeted cost.
C)if the total is too high then the amounts should be force-fitted into the customer's budget.
D)if the total is too low then extra non-project expenses should be added.

Question 41

The cost performance index CPI) is a measure of the cost efficiency with which the project is being performed.If the cumulative earned value is greater than the cumulative actual costs, then

A)the CPI is greater than 1.0.
B)the CPI is less than 1.0.
C)CPI cannot be determined with CEV and CAC.
D)the CPI is negative.

Question 42

A third method for determining the forecasted cost at completion is to re-estimate the costs for all the remaining work to be performed and then add this re-estimate to the cumulative actual cost.If the amount of cumulated actual costs is less than difference between the total budgeted cost and the re-estimate, then

A)the FCAC is greater than the TBC.
B)the FCAC is less than the TBC.
C)the FCAC cannot be calculated with the values given.
D)additional information is needed to predict the FCAC.

Question 43

Calculate the forecasted cost at completion if the total budgeted cost is $15,000, the cumulative actual cost is $10,000, and the cumulative earned value is $12,000.

A)FCAC = $7,000
B)FCAC = $17,000
C)FCAC = $13,000
D)FCAC = $37,000

Question 44

The is the amount that was actually spent to accomplish the work that was scheduled to be performed up to that point in time.

A)total budgeted cost TBC)
B)cumulative budgeted cost CBC)
C)cumulative actual cost CAC)
D)cumulative earned value CEV)

Question 45

The is the product of the percent complete and the sum of the estimated costs of all the specific activities that make up a work package or the project.

A)total budgeted cost TBC)
B)cumulative budgeted cost CBC)
C)cumulative actual cost CAC)
D)cumulative earned value CEV)

Question 46

Costs are when an item is ordered even though actual payment may take place at some later time.

A)discharged
B)committed
C)postponed
D)restrained

Question 47

Consider a project that involves painting five similar houses over ten weeks one house every two weeks) for a total budgeted cost of $20,000.The budget is $4,000 per house.At of the end of week 5, you determine that $10,000 has actually been spent and three houses have been painted completely.What is the earned value of the project?

A)$10,000
B)$12,000
C)$4,000
D)$20,000

Question 48

The is the amount that was budgeted to accomplish the work that was schedule to be performed up to that point in time.

A)total budgeted cost TBC)
B)cumulative budgeted cost CBC)
C)cumulative actual cost CAC)
D)cumulative earned value CEV)

Question 49

Determining the earned value involves collecting data on the percent complete for each work package and then converting this percentage to a dollar amount by multiplying the of the work package by the percent complete.

A)total budgeted cost TBC)
B)cumulative budgeted cost CBC)
C)cumulative earned value CEV)
D)cumulative actual cost CAC)

Question 50

The is the sum of the estimated costs of all the specific activities that make up a work package or the project.

A)total budgeted cost TBC)
B)cumulative budgeted cost CBC)
C)cumulative actual cost CAC)
D)cumulative earned value CEV)

Question 51

It's important that the person estimating the percent complete not only assess how much work has been performed but also consider

A)what work should have been done.
B)what work remains to be done.
C)what work others have to do on other projects.
D)the cost of the work.

Question 52

As data are collected on , including portions of any committed cost, they need to be totaled by work package so that they can be compared to the

A)planned cost, total budgeted cost.
B)budgeted cost of work scheduled, actual cost of work performed.
C)actual cost, cumulative budgeted cost.
D)cumulative earned value, total budgeted cost.

Question 53

If the cumulative earned value is $10 and the cumulative actual costs are $20, then the CPI is

A)$10.
B)-$10.
C)0.5.
D)2.0.

Question 54

Calculate the forecasted cost at completion if the total budgeted cost = $10,000, the CEV is $8,000, and the CAC is $4,000.

A)FCAC = $5,000
B)FCAC = $20,000
C)FCAC = $6,000
D)FCAC = $4,000

Question 55

A second method for determining the forecasted cost at completion assumes that, regardless of the efficiency rate the project or work package has experienced in the past, the work to be performed on the remaining portion of the project or work package will be done according to budget.If the cumulative actual cost is greater than the cumulative earned value, then

A)the FCAC is greater than the TBC.
B)the FCAC is less than the TBC.
C)the FCAC cannot be calculated with the values given.
D)additional information is needed to predict the FCAC.

Question 56

Earned value, the value of , is a key parameter that must be determined throughout the project.

A)the work scheduled
B)the resources used
C)the resources assigned
D)the work actually performed

Question 57

A method for calculating the forecasted cost at completion assumes that the work to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far.If the cost performance index is greater than 1.0, then

A)the FCAC is greater than the TBC.
B)the FCAC is less than the TBC.
C)the FCAC cannot be calculated with CPI.
D)additional information is needed to predict the FCAC.

Question 58

Plot curves on the same graph to reveal any trends toward improving or deteriorating cost performance.

A)AC, TBC, EV
B)actual cost and budgeted cost
C)CBC, CAC, and CEV
D)CBC, PV, and BCWS

Question 59

Calculate the cost variance if the cumulative earned value is $10 and the cumulative actual costs are $20.

A)$10
B)-$10
C)0.5
D)2.0

Question 60

Another indicator of cost performance is cost variance CV).If the cumulative earned value is greater than the cumulative actual costs, then

A)the CV is positive.
B)the CV is equal to the TBC.
C)CV cannot be determined with CEV and CAC.
D)the CV is negative.

Question 61

Managing cash flow involves making sure that sufficient payments are received from the customer in time so that

A)you have enough money to cover the costs of performing the project.
B)you hold a reserve of funds instead of paying bills.
C)payroll can be paid and suppliers are delayed indefinitely.
D)deposits can be made in several different accounts.

Question 62

Which of the following is not a way to reduce the costs of activities:

A)reduce the scope or requirements.
B)substitute less expensive materials.
C)assign a person with less expertise or less experience to perform or help with the activity.
D)increase productivity through improved methods or technology.

Question 63

When evaluating work packages that have a negative cost variance, you should focus on taking corrective actions to reduce the costs of:

A)activities that have a small cost estimate.
B)activities that have a moderate cost estimate.
C)activities that have a large cost estimate.
D)all the activities in the project.

Question 64

When evaluating work packages that have a negative cost variance, you should focus on taking corrective actions to reduce the costs of:

A)activities that will be performed in the near term.
B)activities that will be performed in the towards the end of the project.
C)activities that will be performed at the end of the project.
D)all the activities in the project.

Question 65

The contractor's outflow of cash can be controlled by

A)paying a bill as soon as it is received.
B)delaying payment until cash is received to pay the bill.
C)delaying payment until it is due.
D)never paying bills.

Question 66

Calculate the forecasted cost at completion if the cumulative actual cost is $10,000 and the re-estimate of remaining work to be performed is $5,000.

A)FCAC = $5,000
B)FCAC = $15,000
C)FCAC = 2
D)FCAC = 0.5

Question 67

The contractor might try to negotiate payment terms that require the customer to do one or more of the following except

A)provide frequent payments, such as weekly or monthly payments rather than quarterly payments.
B)make equal monthly payments based on the expected duration of the project.
C)make a single payment at the end of the project.
D)provide a down payment at the start of the project.

Question 68

It's crucial that cost variances and inefficiencies be identified early so that

A)corrective action can be taken before the situation gets worse.
B)negotiations can take place for the contract.
C)the project can be monitored for self-correction.
D)time is not applied to the project.

Question 69

involves the following: Analyzing cost performance to determine which work packages may require corrective action; Deciding what specific corrective action should be taken; and Revising the project plan, including time and cost estimates, to incorporate the planned corrective action.

A)Resource analysis
B)CPI monitoring
C)Cost control
D)Problem solving