Question 1

A budget contingency of $1 million on a $10 million project means that the project will be planned for a cost of $10 million,but the project organization receives an extra $1 million to guard against unforeseen cost overruns.

Accepted Answer

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Question 2

What are three benefits to the use of contingency funds?

Accepted Answer

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Question 3

A contingency rate of 10% on a building project budgeted at $20 million means the project organization estimated project costs to be:
A)$22 million.
B)$2 million.
C)$18 million.
D)$200 million.

Accepted Answer

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Question 4

An early warning signal for the potential of an overdrawn budget is created when:
A)Activity-based costing cannot identify drivers.
B)A bottom-up budget never makes it up the chain of command.
C)Contingency funds are applied for.
D)A top-down process moves too quickly down to the functional managers.

Accepted Answer

The application for contingency funds is a clear signal that the budget may be overdrawn or at risk of going over budget. Contingency funds are typically set aside for unexpected expenses or emergencies, and when they need to be utilized, it indicates that the budget may not have been properly planned or managed.

Question 5

What is a budget contingency and what are three reasons it might be useful?

Accepted Answer

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Quiz 8: Cost Estimation and Budgeting

A budget contingency of $1 million on a $10 million project means that the project will be planned for a cost of $10 million,but the project organization receives an extra $1 million to guard against unforeseen cost overruns.

What are three benefits to the use of contingency funds?

A contingency rate of 10% on a building project budgeted at $20 million means the project organization estimated project costs to be:

An early warning signal for the potential of an overdrawn budget is created when:

What is a budget contingency and what are three reasons it might be useful?