Sample Questions Chapter 5

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Which of the following is a direct cost? 1) _______

A) labor B) rent
C) health benefits D) depreciation on equipment

2) Three workers complete a full 8-hour day finishing concrete for a terrace. All three workers are 2) _______
paid $12 an hour and the job bills to the customer for $450. What are the total direct labor costs?
A) $288 B) $96 C) $450 D) $12

3) Workers paid $15.00 per hour with an overhead charge of 1.45 and a personal time allowance of 3) _______
1.15, have what total direct labor cost for an 8-hour work day?
A) $236.80 B) $200.10 C) $151.30 D) $174.00

4) Which of these is typically a nonrecurring cost? 4) _______

A) material B) labor C) site study D) sales

5) Unplanned costs incurred when steps are taken to speed up a project's completion are called: 5) _______
A) normal costs. B) pass-through costs.
C) expedited costs. D) accelerated costs.

6) The order of magnitude cost estimate is used when: 6) _______

A) historical data are readily available.
B) parametric estimation has already been performed.
C) information or time is scarce.
D) ballpark estimates are not considered accurate enough.

7) Effective comparative estimates rely most heavily on: 7) _______

A) the correct number of employees on the new project compared with the previous one.
B) true comparability between the current project and previous project work.
C) an accurate inflation factor.
D) the correct number of years elapsed between the old project and the current one.

8) Once most of the design work is complete, at a point when the scope and capabilities of the 8) _______
project are quite well understood, a ________ may be developed.
A) comparative estimate B) definitive estimate
C) parametric estimate D) non-parametric estimate

9) Whether it is the Boeing V-22 Osprey or a simple storm door installation for a do-it-yourselfer, 9) _______
nothing is ever completed as quickly or as cheaply as initial estimates due to:
A) low initial estimates. B) lack of definition.
C) unexpected technical difficulties. D) specification changes.

10) It began as a simple macro that would extract grades and post them on a web site, but once the 10) ______
web programmer began the work, he became obsessed with various charting features, grade
summaries, and reports that could be added to make this the grandest web site in the tri-county
area. As 2 hours of programming work grew to 20 and then 80, he knew that the client wouldn't
be happy with the cost overrun. The only comment he mumbled as he finished his work was:
A) "I had some technical difficulties, sorry."
B) "This project lacked definition from the outset, sorry."
C) "I thought I'd never get the wizard's hat! Oh, by the way, your grades work."
D) "There were some specification changes, sorry."
11) Input is received from an organization's management to create a project budget in: 11) ______
A) bottom-up budgeting. B) activity-based budgeting.
C) zero-based budgeting. D) top-down budgeting.

12) A budget that is created by starting with the work breakdown structure, determining costs for 12) ______
each work package, and then adding these costs together is:
A) top-down budgeting. B) activity-based budgeting.
C) zero-based budgeting. D) bottom-up budgeting.

13) The new dock would require 24 piers to support it and it was known that each time a pier is 13) ______
sunk into the harbor it would take 300 man hours of labor at $25 per hour. An activity-based
costing of the entire pier system results in a total cost of how much?
A) $600 B) $180,000 C) $300,000 D) $7,500

14) A budget containing disaggregated figures across the schedule when work is planned is a: 14) ______
A) calendar budget. B) time-phased budget.
C) temporal budget. D) chronic budget.

15) What is the total amount budgeted for March in this time-phased budget? 15) ______

Activity January February March April

Survey 5,000
Design 3,000 3,000
Dirt 4,000
Foundation 10,000
Framing 35,000
Plumb 6,000
Wire 5,500

A) $35,000 B) $41,000 C) $6,000 D) $66,000

16) What is the total project budget in this time-phased budget? 16) ______

Activity July August September October November

RFP 31,000
Analysis 3,000 15,000
Design 23,000 34,000
Coding 46,000
Testing 10,000
Training 15,000 15,000
Roll-Out 18,000

A) $193,000 B) $184,500 C) $178,300 D) $210,000

17) An allocation of extra funds to cover uncertainties and improve chances that the project can be 17) ______
completed within the timeframe originally specified is a:
A) reallocation budget. B) reserve line budget.
C) setback. D) budget contingency.
18) It was fortunate that the project budget included contingency funding; the top manager had not 18) ______
foreseen that the project would need the services of their elite slide rule squad in more than one
area at the same time. Design couldn't complete their work without their services, nor could
marketing, or production. Contingency funds came in handy to meet the unanticipated:
A) interaction costs. B) consequences of Murphy's Law.
C) abnormal project conditions. D) change in project scope.

19) A disadvantage of contingency funds is: 19) ______

A) a recognition that the future contains both knowns and unknowns and the problems that
might arise will impact the budget.
B) it is difficult to ascertain across what project activities contingency funds should be
applied.
C) that provision is made in the company plans for an increase in project cost.
D) that application to the contingency fund gives an early warning signal of a potential
overdrawn budget.

20) An early warning signal for the potential of an overdrawn budget is created when: 20) ______
A) a bottom-up budget never makes it up the chain of command.
B) a top-down process moves too quickly down to the functional managers.
C) activity-based costing cannot identify drivers.
D) contingency funds are applied for.