Chapter 7 Industrial Management Study Guide

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  • Topic: Cost, Costs, Cost overrun
  • Pages : 10 (1994 words )
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  • Published : April 14, 2013
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File: ch07, Chapter 7: Budgeting and Cost Estimation

Multiple Choice

1. If a project budget is overfunded, it will often ________. a) Produce waste
b) Encourage slack management
c) Improve morale
d) Produce waste and encourage slack management

Ans: d
Response: Refer to chapter 7, introduction.
Level: easy

2. If a project budget is underfunded, it will often ________. a) Inhibit accomplishment
b) Frustrate committed stakeholders
c) Inhibit accomplishment and frustrate committed stakeholders d) Inhibit accomplishment, frustrate committed stakeholders, and reduce costs

Ans: c
Response: Refer to chapter 7, introduction.
Level: easy

3. Identify the statement that is not correct regarding a project budget. a) The budget is included in a project plan
b) The budget is not an expression of organizational policy
c) The budget serves as a control mechanism for the project
d) The budget serves as a standard for comparison of planned and actual usage of resources

Ans: b
Response: Refer to chapter 7, introduction.
Level: intermediate

4. The project’s budget should ________.
a) Associate resource use with the achievement of organizational goals b) Allow funds to be spent without linkage to achievement
c) Not reflect the timing of expenses associated with the use of resources d) Never be changed during project execution

Ans: a
Response: Refer to chapter 7, introduction
Level: easy

5. In order to develop a budget, the PM must forecast ________. a) The type and quantities of resources required
b) The labor rates and prices of resources required
c) The type, quantities, prices/rates of resources and when they will be used d) Answer c plus the expected monetary value and relevant uncertainty

Ans: d
Response: Refer to section 7.1.
Level: intermediate

6. A fully costed work element would include direct costs plus ________. a) Overhead
b) G&A charges
c) G&A charges and profit
d) Overhead and G&A charges

Ans: d
Response: Refer to section 7.1, work element costing.
Level:

7. The traditional organizational budget is ________.
a) Category-oriented or activity-oriented
b) Project-oriented
c) Program-oriented
d) Project-oriented or program-oriented

Ans: a
Response: Refer to section 7.1, category/activity budgeting vs. program budgeting. Level: intermediate

8. ________ budgeting aggregates income and expenditures across projects. a) Category-oriented
b) Activity-oriented
c) Program-oriented
d) Expense-oriented

Ans: c
Response: Refer to section 7.1, category/activity budgeting vs. program budgeting. Level: intermediate

9. The authors identify ________ estimation errors as the two types of generic estimation errors. a) Small and large
b) Random and planned
c) Certain and uncertain
d) Random and systematic

Ans: d
Response: Refer to section 7.2, on making better estimates
Level: easy

10. The tracking signal, computed as TS = RSFE/MAD measures ________. a) Random error in the estimate
b) The estimator’s bias
c) The coefficient of correspondence
d) The coefficient of determination

Ans: b
Response: Refer to section 7.2, on making better estimates.
Level: easy

11. If forecast errors are normally distributed, MAD is approximately ________% of a standard deviation. a) 100 percent
b) 99.73 percent
c) 95 percent
d) 80 percent

Ans: d
Response: Refer to section 7.2, on making better estimates.
Level: intermediate

12. If the estimator's errors are truly random, the value of the running sum of forecast errors (RSFE) should approach ________. a) Zero
b) 1 standard deviation
c) 50 percent of the running sum of forecasted values
d) 100 percent of the running sum of forecasted values

Ans: a
Response: Refer to section 7.2, on making better estimates.
Level: advanced

13. If projects include repetitive tasks with significant human input, the ________ rate should be factored...
tracking img