Information Technology Project Management 8th edition Kathy Schwalbe

IT Project Management 8e Kathy Schwalbe

ISBN-10:1285452348, ISBN-13:978-1285452340

Chapter 7: Managing Project Costs

True / False

1. Overrun refers to the additional percentage quantity by which estimates exceed actual costs.

a. True
b. False

ANSWER:
False

RATIONALE:
Explanation: Overrun is the additional percentage or dollar amount by which actual costs exceed estimates.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.264

LEARNING OBJECTIVES:
INFO.SCHW.14.48 – LO: 7-1

NATIONAL STANDARDS:
United States – BUSPROG: Technology

TOPICS:
The Importance of Managing Project Costs

KEYWORDS:
Bloom’s: Information

2. The initial outcome of the planning cost management process is a change request.

a. True
b. False

ANSWER:
False

RATIONALE:
Explanation: The primary outcome of the planning cost management process is a cost management plan. Planning cost management involves identifying the policies, procedures, and documentation that will be used for planning, executing, and controlling project costs.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.266

LEARNING OBJECTIVES:
INFO.SCHW.14.48 – LO: 7-1

NATIONAL STANDARDS:
United States – BUSPROG: Technology

TOPICS:
The Importance of Managing Project Costs

KEYWORDS:
Bloom’s: Information

3. IT project managers must be able to present and discuss project information both in financial and technical terms.

a. True
b. False

ANSWER:
True

RATIONALE:
Explanation: Most members of an organization’s executive board have a better understanding of financial terms than IT terms and are more concerned about finance. Therefore, IT project managers need to be able to present and discuss project information both in financial terms and technical terms.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.266

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Technology

TOPICS:
Basic Principles of Cost Management

KEYWORDS:
Bloom’s: Information

4. Project managers should perform cash flow analysis to determine net present value.

a. True
b. False

ANSWER:
True

RATIONALE:
Explanation: Cash flow analysis is a method of determining the estimated annual costs and benefits for a project and the resulting annual cash flow. Project managers should perform cash flow analysis to determine net present value.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.269

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Technology

TOPICS:
The Importance of Project Cost Management

KEYWORDS:
Bloom’s: Information

5. Intangible costs are easily measurable in monetary terms.

a. True
b. False

ANSWER:
False

RATIONALE:
Explanation: Intangible costs or benefits are difficult to measure in monetary terms. Conversely, tangible costs or benefits can be measured in dollars.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.269

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Analytic

TOPICS:
Basic Principles of Cost Management

KEYWORDS:
Bloom’s: Information

6. When deciding on investments or project continuation, one should exclude sunk costs.

a. True
b. False

ANSWER:
False

RATIONALE:
Explanation: Sunk cost is money that has been spent in the past. When deciding on investments or project continuation, one should not include sunk costs.

POINTS:
1

DIFFICULTY:
Problem: Average

REFERENCES:
p.270

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Analytic

TOPICS:
Basic Principles of Cost Management

KEYWORDS:
Bloom’s: Comprehension

7. It is vital for project managers to focus on direct costs as they can be effectively controlled.

a. True
b. False

ANSWER:
False

RATIONALE:
Explanation: Direct costs are directly related to creating the deliverables of the project. Project managers should focus on direct costs because they can be controlled.

POINTS:
1

DIFFICULTY:
Problem: Average

REFERENCES:
p.269-270

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Analytic

TOPICS:
Basic Principles of Cost Management

KEYWORDS:
Bloom’s: Comprehension

8. If a critical supplier goes out of business, management reserves can be set aside to cover the ensuing costs.

a. True
b. False

ANSWER:
True

RATIONALE:
Explanation: Management reserves allow for unforeseen future circumstances. For example, if a project manager falls sick for two weeks or a critical supplier goes out of business, management reserves can be set aside to cover the resulting costs.

POINTS:
1

DIFFICULTY:
Problem: Average

REFERENCES:
p.270

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Analytic

TOPICS:
Basic Principles of Cost Management

KEYWORDS:
Bloom’s: Comprehension

9. Contingency reserves are commonly termed known unknowns.

a. True
b. False

ANSWER:
False

RATIONALE:
Explanation: Contingency reserves allow for foreseeable future circumstances. They are commonly known as recognized unknowns.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.270

LEARNING OBJECTIVES:
INFO.SCHW.14.49 – LO: 7-2

NATIONAL STANDARDS:
United States – BUSPROG: Analytic

TOPICS:
Basic Principles of Cost Management

KEYWORDS:
Bloom’s: Information

10. A cost management plan may include organizational procedures links, control thresholds, and process descriptions.

a. True
b. False

ANSWER:
True

RATIONALE:
Explanation: Typically, a cost management plan comprises level of accuracy, organizational procedures links, process descriptions, control thresholds, and rules of performance measurement, among others.

POINTS:
1

DIFFICULTY:
Problem: Simple

REFERENCES:
p.271

LEARNING OBJECTIVES:
INFO.SCHW.14.50 – LO: 7-3

NATIONAL STANDARDS:
United States – BUSPROG: Technology

TOPICS:
Planning Cost Management

KEYWORDS:
Bloom’s: Information

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