MGO 634 F10/PM1 Project Management Fall 2018

Quiz 7
Name: ___________________ __________________ Grade:_____/ 10
(PRINT): *Last* First
Please answer only 10 of the following 15 Multiple Choice questions by selecting the best answer, from
among other possible “good” answers, by CIRCLING the letter next to it.

Chapter 7: Budgeting and Cost Estimation

1. A work element whose cost is fully developed would __________.

a) exclude the cost of labor and resources
b) include only the profit and direct costs
c) exclude the cost of special machinery and overheads
d) include direct costs plus overhead and G&A charges

Ans: d
Section Reference: 7.1 Estimating Project Budgets
Level: intermediate
Bloom’s: Comprehension

2. If projects include repetitive tasks with significant human input, the __________ rate should
be factored into the cost estimate.
a) inflation
b) hurdle
c) interest
d) learning

Ans: d
Section Reference: Summary
Level: easy
Bloom’s: Knowledge

3. The pattern of deviations in cost and usage used for exception reporting to management is
called __________.
a) simulations

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MGO 634 F10/PM1 Project Management Fall 2018
Quiz 7
b) assumptions
c) variances
d) summaries

Ans: c
Section Reference: Glossary
Level: easy
Bloom’s: Knowledge

4. __________ budgeting aggregates income and expenditures by project or program, often in

addition to aggregation by organizational unit or activity.
a) Activity based
b) Capital
c) Operational
d) Project
Ans: d
Section Reference: Glossary
Level: easy
Bloom’s: Knowledge

5. Unless the project manager is familiar with the firm’s __________ it will be very difficult to
exercise budget control.
a) accounting system
b) budget plans
c) marketing procedures
d) cost accounting
Ans: a
Section Reference: 7.1 Estimating Project Budgets
Level: easy
Bloom’s: Knowledge

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MGO 634 F10/PM1 Project Management Fall 2018
Quiz 7
6. The __________ form of budgeting has the advantage of using individuals closer to the work
to provide estimates of resource requirements.
a) top-down budgeting
b) work element costing
c) bottom-up budgeting
d) iterative budgeting

Ans: c
Section Reference: 7.1 Estimating Project Budgets
Level: easy
Bloom’s: Knowledge
7. The budget process generally begins when the top management invites each division to
submit a__________ for the upcoming year.
a) budget request
b) predictive budget
c) budget estimate
d) predictive request

Ans: a
Section Reference: 7.1 Estimating Project Budgets
Level: easy
Bloom’s: Comprehension

8. A __________ is a plan for allocating resources. The allocation of resources indicates the
degree to which different activities of an organization are supported fully.
a) budget
b) direct cost
c) management plan
d) allocation effort

Ans: a
Section Reference: Introduction

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MGO 634 F10/PM1 Project Management Fall 2018
Quiz 7
Level: easy
Bloom’s: Knowledge

9. The pattern of constraints in a budget embodies organizational __________.

a) policy
b) effort
c) human resource management
d) risk management

Ans: a
Section Reference: Introduction
Level: easy
Bloom’s: Comprehension
10. The __________ charge is composed of the costs of senior management, the various data
functions, and any other expenses not included in overhead. Often, these charges are a fixed
percentage of either the direct costs or the total of all direct and indirect costs.
a) salary
b) project management
c) ethical
d) G&A

Ans: d
Section Reference: 7.1 Estimating Project Budgets
Level: easy
Bloom’s: Knowledge

11. Each time the output doubles, the worker hours per unit decrease to a fixed percentage of
their previous value. That percentage is called the __________ rate.
a) inflation
b) hurdle
c) interest
d) learning

Ans: d

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MGO 634 F10/PM1 Project Management Fall 2018
Quiz 7
Section Reference: Improving the Process of Cost Estimation
Level: intermediate
Bloom’s: Knowledge
12. You have been asked to estimate the costs for a project to build an industrial power plant.
Based on historical data, the steam turbine accounts for 30 percent of the total costs for the
plant. If the steam turbine costs $300,000, the expected top-down estimated cost for this project
would be __________.
a) $1,000,000
b) $100,000
c) $10,000
d) $900,000
Ans: a
Section Reference: Improving the Process of Cost Estimation
Level: easy
Bloom’s: Analysis

13. A budget strategy that is based on collecting the judgments and experiences of top and
middle managers is referred to as the __________ approach or method.

a) parametric estimating
b) statistical equivalence
c) bottom-up estimating
d) top-down estimating

Ans: d
Section Reference: 7.1 Estimating Project Budgets
Level: easy
Bloom’s: Comprehension

14. Many lower-level managers often treat the entire budgeting process as if it were a
__________, a situation in which any individual’s gain is another individual’s loss. This can
make competition among junior managers quite intense.
a) zero-sum game
b) pie-chart dilemma
c) Brooks’ Law result
d) Top-down approach

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MGO 634 F10/PM1 Project Management Fall 2018
Quiz 7
Ans: a
Section Reference: 7.1 Estimating Project Budgets
Level easy
Bloom’s: Comprehension

15. The advantage of the______ process is that it is generally associated with participative
management.
a) bottom-up
b) top-down
c) Murphy’s
d) Efficient

Ans: a
Section Reference: 7.1 Estimating Project Budgets