Chapter 05 Estimating Project Times and Costs True False

True / False Questions 58. Project estimates should be broken down into as much detail, and with as much accuracy, as possible. FALSE Detailed data gathering is not always possible, practical or necessary when developing cost and time estimates. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Medium 59. Cost, time, and budget estimates are the lifeline for control; they serve as the standard for comparison of the actual and the planned throughout the life of the project. TRUE Feedback: Project status reports depend on reliable estimates as the major input for measuring variances and taking corrective action. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Easy 60. Past experience is almost always used primarily in the initial phases of estimating. TRUE Feedback: Past experience is a good starting point for developing time and cost estimates. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Medium 61. After averaging out the underestimates and overestimates, a long-duration project is more likely to be on target than a short-term, small project. FALSE Feedback: Long-duration projects increase the uncertainty in estimates. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Medium 62. The process of forecasting or approximating the time and cost of completing project deliverables is called planning. FALSE Feedback: The process of forecasting the time and cost of completing project deliverables is called estimating. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Easy 63. The project management structure chosen to manage the project will have little impact on the quality of estimates. FALSE Feedback: Which project structure is chosen to manage the project will influence time and cost estimates. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Medium 64. As long as everyone in a project adds a little padding to reduce risk, the project duration and cost estimates will be more accurate. FALSE Feedback: If everyone at all levels of the project adds a little padding to reduce risk, the project estimates will be seriously overestimated. This phenomenon causes some managers or owners to call for a 10–15 percent cut in time and/or cost for the project. Of course the next time the game is played, the person estimating cost and/or time will pad the estimate to 20 percent or more. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Medium 65. Organization culture can significantly influence project time and cost estimates. TRUE Feedback: Organization culture can significantly influence project estimates. For example, in some organizations padding estimates is tolerated and even privately encouraged. Other organizations place a premium on accuracy and strongly discourage estimating gamesmanship. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Factors Influencing the Quality of Estimates Level: Easy 66. If a project is internal to the company and relatively small, the bottom-up approach to estimating time and costs for the project is the best choice. FALSE Feedback: Good conditions for top-down estimating are when there is high uncertainty involved in the project, when the project is small and internal, when the scope is unstable and when it involves strategic decision making. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Top-Down versus Bottom-Up Estimating Level: Easy 67. If time and costs are important to a project the top-down approach to estimating time and costs for the project is the best choice. FALSE Feedback: Good conditions for bottom-up estimating are when cost and time are important to the project, when there is a fixed-price contract and when the customer wants details. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Top-Down versus Bottom-Up Estimating Level: Easy 68. The ideal approach to estimating project time and costs is to use both the top-down and the bottom-up approach. TRUE Feedback: The ideal approach is for the project manager to allow enough time for both the top-down and bottom-up estimates to be worked out so a complete plan based on reliable estimates can be offered to the customer. In this way false expectations are minimized for all stakeholders and negotiation is reduced. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Top-Down versus Bottom-Up Estimating Level: Medium 69. Estimates that are typically based on estimates of elements found in the work breakdown structure are called bottom-up estimates. TRUE Feedback: Bottom-up estimates start with estimates for work packages. These then can be “rolled up” to estimate the cost and duration of major deliverables and the project itself. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Top-Down versus Bottom-Up Estimating Level: Easy 70. Top-down estimates usually are derived from someone who uses experience and/or information to determine the project duration and total cost. TRUE Feedback: Top-down estimates usually are derived from someone who uses experience and/or information to determine the project duration and total cost. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Top-Down versus Bottom-Up Estimating Level: Easy 71. Estimating the total cost of a house by multiplying the total square feet by cost per square foot is an example of the apportion method of estimating costs. FALSE Feedback: Apportionment is used when projects closely follow past projects in features and costs. Given good historical data, estimates can be made quickly with little effort and reasonable accuracy. This method is very common in projects that are relatively standard but have some small variation or customization. Estimating the total cost of a house by multiplying the total square feet by cost per square foot is an example of the ratio method of estimating costs. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Methods for Estimating Project Times and Costs Level: Medium 72. Estimating the total cost of a project by multiplying each major function by a complexity factor is an example of the apportion method of estimating costs. FALSE Feedback: Apportionment is used when projects closely follow past projects in features and costs. Given good historical data, estimates can be made quickly with little effort and reasonable accuracy. This method is very common in projects that are relatively standard but have some small variation or customization. Estimating the total cost of a project by multiplying each major function by a complexity factor is an example of the function point method of estimating costs. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Methods for Estimating Project Times and Costs Level: Medium 73. Phase estimating is used when a project cannot be rigorously defined because of the uncertainty of design or the final product. TRUE Feedback: Phase estimating is used when an unusual amount of uncertainty surrounds a project and it is impractical to estimate times and costs for the entire project. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Methods for Estimating Project Times and Costs Level: Medium 74. All task time estimates need consistent time units. TRUE Feedback: Estimates of time must consider whether normal time is represented by calendar days, workdays, workweeks, hours, minutes, etc. Network analysis requires a standard unit of time. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Estimating Guidelines for Times, Costs, and Resources Level: Easy 75. One guideline to follow when estimating time, cost and resources is to use several people to make the estimate for a task. TRUE Feedback: It is well known that cost or time estimates usually have a better chance of being reasonable and realistic when several people with relevant experience and/or knowledge of the task are used. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Estimating Guidelines for Times, Costs, and Resources Level: Easy 76. The consensus method of estimating costs is a bottom-up technique. FALSE Feedback: The consensus method simply uses the pooled experience of senior and/or middle managers to estimate the total project duration and cost. This typically involves a meeting where experts discuss, argue, and ultimately reach a decision as to their best guess or estimate. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Methods for Estimating Project Times and Costs Level: Easy 77. The salary of the project manager and her administrative assistant is classified as direct labor costs. FALSE Feedback: Direct project overhead costs can be tied to project deliverables or work packages. Examples include the salary of the project manager and temporary rental space for the project team. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Types of Costs Level: Medium 78. General and administrative costs are usually allocated as a percent of the total of a direct cost which includes labor, materials, or equipment. TRUE Feedback: G&A costs are usually allocated as a percent of total direct cost, or a percent of the total of a specific direct cost such as labor, materials, or equipment. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Types of Costs Level: Medium 79. Work package estimates should include allowances for contingencies. FALSE Feedback: Work package estimates should not include allowances for contingencies. The estimate should assume normal or average conditions even though every work package will not materialize as planned. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Estimating Guidelines for Times, Costs, and Resources Level: Medium 80. Estimates are supposed to be based on normal conditions. While this is a good starting point, it rarely holds true in real life. TRUE Feedback: Estimates are supposed to be based on normal conditions. While this is a good starting point, it rarely holds true in real life. This is especially true when it comes to the availability of resources. AACSB: Reflective Thinking Bloom's: Understand Learning Objective: Methods for Estimating Project Times and Costs Level: Easy 82.