Plan Cost Management

Prep Test

Multiple Choice

1. Which document sets out the format and establishes the activities and criteria for planning, structuring, and controlling the project’s cost?

A Activity cost estimates

B Basis of estimates

C Cost management plan

D Spend plan

2. The type of estimate done in the beginning of a project with a range of –25% to +75% is

A Rough Order of Magnitude

B Budgetary

C Engineering

D Definitive

3. Which type of estimate uses expert judgment and historical information?

A Parametric

B Analogous

C Three-point

D Bottom-up

4. Which type of estimate uses a statistical relationship between historical data and variables, such as weight, size, and duration?

A Analogous

B Three-point

C Parametric

D Bottom-up

5. If you have a lot of uncertainty and risk associated with a particular work package, what type of estimate should you develop?

A Analogous

B Three-point

C Parametric

D Bottom-up

6. The most accurate form of estimating is

A Parametric

B Analogous

C Three-point

D Bottom-up

7. Funds that cover unplanned in-scope work are called

A Contingency reserve

B Risk reserve

C Management reserve

D Risk response reserve

8. The authorized time-phased budget is

A The project baseline

B The cost baseline

C The project management plan

D The performance baseline

Scenario 1

You are installing 400 new computers and need to come up with a high-level estimate. You did a similar project last year. You look back at your records and find the following:

■ Each computer cost $675.

■ Labor rates were $85 per hour.

■ Each computer took 1 hour to install.

Based on a vendor quotation, you estimate that the computers will cost $655 each. Labor rates are up by 10%. You estimate the time to install will be about the same. Using the analogous estimating technique, what is your cost estimate?

A $299,400

B $262,000

C $296,000

D $325,600

Scenario 2

Your organization is purchasing some new off-the-shelf software. You hired a consultant to do the integration with three existing applications. The consultant has given you the following information:

■ If the interfaces are relatively simple and the code is clean, it should take 50 hours.

■ However, in his experience, something always goes wrong, so he thinks it will probably take 60 hours.

■ And, if he runs into unforeseen problems, the interfaces don’t work, and he has to write extensive coding workarounds, it will take closer to 130 hours.

The consultant charges $100 per hour. What is the expected cost?

A $6,900

B $8,100

C $8,200

D $7,000

Answers

Multiple Choice

1. C. Cost management plan. The cost management plan describes the structure and criteria that will be used for cost planning, estimating, budgeting and reporting. See Plan Cost Management: Outputs.

2. A. Rough Order of Magnitude. This measurement band can differ by industry, but it is a standard generic rough order of magnitude range. Spend some time with Estimate Costs: Tools and Techniques.

3. B. Analogous. Analogous estimating uses expert judgment and information from past projects. Go back to Analogous estimating.

4. C. Parametric. Parametric estimating uses mathematical models to develop cost estimates. ReviewParametric estimating.

5. B. Three-point. A three-point estimate accounts for risk and uncertainty. Look into Three-point estimating.

6. D. Bottom-up. A bottom-up estimate is the most accurate estimate. It also takes the most time to prepare. Check out the information in Bottom-up estimating.

7. C. Management reserve. Management reserve is used for project changes to scope and cost. It covers work that is in-scope, but unplanned. See the content under Reserve analysis for determining the budget.

8. B. The cost baseline. This is the authorized budget for the project, allocated over time. Check outDetermine Budget: Outputs.

Scenario 1

A. $299,400. 400 computers × 655 = $262,000. 1 hour per computer install = 400 hours. The (old) rate of 85 × 1.1 = 93.5 hourly rate. 400 × 93.50 = $37,400. $262,000 + $37,400 = $299,400. Go overParametric estimating.

Scenario 2

D. $7,000. The three-point estimate with a weighted average will give you the expected cost. (50 + 4(60) + 130) / 6 = 70 hours. 70 × $100 = $7,000. Go to Three-point estimating.