Question 1

Traditional organizational budgets are task-oriented, rather than activity-oriented.

Accepted Answer

Traditional organizational budgets are typically activity-oriented, focusing on allocating resources based on specific activities or projects rather than tasks, which are often smaller components of broader activities.

Question 2

Budgeting a project is often more difficult than budgeting routine activities.

Accepted Answer

Budgeting a project usually involves more uncertainties, risks and complexities compared to routine activities, such as regular operating expenses, and requires more detailed planning and allocation of resources.

Question 3

Most organizations use top-down budgeting.

Accepted Answer

Top-down budgeting is a traditional method where senior managers set the budget for an organization or business unit and allocate funds to specific departments or projects. This approach is widely used in organizations around the world.

Question 4

Learning curve theory states that performance of labor per unit will improve by a percentage each time production increases by the same percentage.

Accepted Answer

Learning curve theory states that as more units are produced, the time required to produce each unit decreases at a decreasing rate, resulting in a progressively smaller cost reduction per unit. It does not guarantee a fixed percentage increase in performance.

Question 5

The project budget acts as a project control.

Accepted Answer

The project budget serves as a baseline for measuring project performance against planned expenditures. As such, it can act as an important project control tool, helping to ensure that the project stays on track and within budget.

Question 6

Because project budgeting is for a special case and the organization's budgeting process is for routine work, the project manager need not be familiar with the organization's accounting system.

Accepted Answer

The project manager needs to be familiar with the organization's accounting system because they need to track project expenses, allocate resources and report project financials. The project budget needs to be integrated into the organization's overall budgeting process to ensure alignment with overall financial goals and objectives.

Question 7

Activity budgets show expenses by task and expected time period of the expenditure.

Accepted Answer

The answer of Activity budgets show expenses by task and...

Question 8

By very careful planning, a project manager can do away with cost uncertainty.

Accepted Answer

While careful planning can help reduce cost uncertainty, it is impossible to completely eliminate it as there may still be unforeseeable expenses or changes in the project scope that could impact the budget.

Question 9

Budget cuts are usually disastrous to an exponential life-cycle project.

Accepted Answer

Exponential life-cycle projects require consistent funding and resources throughout their lifespan. Budget cuts can disrupt the flow of resources and cause significant setbacks, making the project more difficult to complete.

Question 10

There is no way other than guessing to estimate the impact of learning on a project's task.

Accepted Answer

There are various methods to estimate the impact of learning on a project's task, such as historical data analysis, expert judgment, learning curves, and simulation models, which go beyond mere guessing.

Question 11

Calculating the Tracking Signal can not only reveal if estimates are biased, it can also tell how severe the bias is.

Accepted Answer

The tracking signal is used to detect and measure bias in forecasting. By calculating the tracking signal, we can determine if estimates are biased and how severe the bias is.

Question 12

The project's budget is merely the sum of its resource costs.

Accepted Answer

The project's budget also includes non-resource costs such as overhead, equipment, and subcontracting fees.

Question 13

Learning curve theory states that performance of labor per unit will improve by a fixed percentage each time production doubles.

Accepted Answer

Learning curve theory assumes a fixed rate of improvement in labor productivity as production doubles. This is also known as the "learning rate."

Question 14

A budget is a plan for allocating resources.

Accepted Answer

A budget is a plan that outlines how resources will be allocated over a specific period of time, usually one year. It helps individuals or organizations to plan their expenses, set priorities, and monitor their financial performance.

Question 15

Individual elements of project budgets are generally more accurate in bottom-up budgeting.

Accepted Answer

Bottom-up budgeting involves breaking down a project into smaller tasks or elements and estimating the cost for each element individually. This results in a more detailed and accurate budget, as opposed to top-down budgeting where the budget is based on a high-level estimate for the entire project.

Question 16

A budget is a plan for allocating resources to project activities.

Accepted Answer

A budget is indeed a plan for allocating resources to project activities. It helps to ensure that resources are allocated efficiently and effectively to meet project objectives within the available financial resources.

Question 17

Expected value is a tool for risk analysis.

Accepted Answer

Expected value is a statistical concept used to measure the potential outcome of a certain decision or event. It is commonly used in risk analysis to determine the average outcome and potential risks involved in a given situation. Therefore, expected value is indeed a tool for risk analysis.

Question 18

A key advantage of top-down budgeting is that the overall budget costs can be estimated quite accurately.

Accepted Answer

Top-down budgeting involves setting an overall budget target and then allocating resources to different departments or projects. This allows for a more accurate estimation of the overall budget costs, as it takes into account the organization's financial capacity and goals.

Question 19

The project manager recognizes an expense when an invoice is actually paid.

Accepted Answer

The project manager recognizes an expense when the product or service has been received, and not when the invoice is paid. This is based on the accrual accounting method, which ensures that revenues and expenses are recorded when they are incurred, regardless of when the money changes hands.

Question 20

Overhead and indirect charges should not be assigned to a project.

Accepted Answer

Overhead and indirect charges are necessary expenses that are indirectly related to the production of goods or services, and should be allocated to projects or products to determine the true cost of production. Failure to do so may result in inaccurate pricing or cost estimation, leading to financial losses for the company.

Quiz 4: Budgeting the Project