Project Management 2nd Edition by Pinto chapter 08

Project Management, 2e (Pinto)
Chapter 8 Cost Estimation and Budgeting

8.1 True/False

1) Direct costs are those clearly assigned to the aspect of the project that generated the cost.
Answer: TRUE
Diff: 1
Section: 8.1 Cost Management
Skill: Factual
AACSB Tag: Reflective

2) Material is an example of a cost that is recurring, variable and direct.
Answer: TRUE
Diff: 2
Section: 8.1 Cost Management
Skill: Factual
AACSB Tag: Reflective

3) An expedited cost is one that does not vary with respect to their usage.
Answer: FALSE
Diff: 2
Section: 8.1 Cost Management
Skill: Factual
AACSB Tag: Reflective

4) An order of magnitude estimate is usually more accurate than a ballpark estimate.
Answer: FALSE
Diff: 1
Section: 8.2 Cost Estimation
Skill: Factual
AACSB Tag: Reflective

5) Comparative estimates are more accurate than definitive estimates when applied to the same
project.
Answer: TRUE
Diff: 2
Section: 8.1 Cost Management
Skill: Factual
AACSB Tag: Reflective




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Copyright © 2010 Pearson Education, Inc.

, 6) A learning rate of 90% means that for every doubling of output, the time required by the
activity falls by 10%.
Answer: FALSE
Diff: 2
Section: 8.3 Creating a Project Budget
Skill: Factual
AACSB Tag: Reflective

7) There is a tendency for different departments or functions to compete for scarce resources in a
zero-sum game when bottom-up budgeting is used to develop a project budget.
Answer: FALSE
Diff: 2
Section: 8.3 Creating a Project Budget
Skill: Factual
AACSB Tag: Reflective

8) Activity-based costing is based on the notion that projects consume activities and activities
consume resources.
Answer: TRUE
Diff: 2
Section: 8.3 Creating a Project Budget
Skill: Factual
AACSB Tag: Reflective

9) A time-phased budget allocates costs across both project activities and the anticipated time in
which the budget is to be expended.
Answer: TRUE
Diff: 2
Section: 8.3 Creating a Project Budget
Skill: Factual
AACSB Tag: Reflective

10) 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.
Answer: FALSE
Diff: 1
Section: 8.3 Creating a Project Budget
Skill: Factual
AACSB Tag: Analytic Skills




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Copyright © 2010 Pearson Education, Inc.