Financial Management for Project Managers Cost Estimation and Budgeting 1

Question 1

Which type of cost estimate is typically prepared during the project initiation phase using analogous techniques and carries an accuracy range of -25% to +75%?

Accepted Answer

Rough Order of Magnitude (ROM) estimate

Answer

A ROM estimate is a high-level approximation made early in a project with limited information, typically ranging from -25% to +75% accuracy.

Question 2

Bottom-up cost estimating involves:

Accepted Answer

Estimating costs at the work package level and summing them up

Answer

Bottom-up estimating breaks work into the smallest components, estimates each individually, and aggregates them to arrive at the total project cost.

Question 3

Parametric cost estimating uses:

Accepted Answer

Statistical relationships between historical data and project variables

Answer

Parametric estimating applies a statistical model or cost driver (e.g., cost per square foot) derived from historical data to estimate project costs.

Question 4

The project cost baseline is best described as:

Accepted Answer

The time-phased budget used to measure and monitor project cost performance

Answer

The cost baseline is the approved, time-phased budget against which actual project costs are tracked and measured throughout execution.

Question 5

Which cost is directly traceable to a specific project deliverable or work package?

Accepted Answer

Direct cost

Answer

Direct costs can be specifically attributed to a project activity or deliverable, such as labor hours worked on a task or materials purchased for it.

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Cost Estimation and Budgeting 1