Product Management Product Management: Cost Estimation 2

Question 1

A PM uses a cost estimation technique that relies on statistical relationships between historical data and project variables. Which technique is this?

Accepted Answer

Parametric estimating

Answer

Parametric estimating uses statistical relationships between historical data and project variables (e.g., cost per unit) to calculate estimates.

Question 2

What does the term 'cost baseline' refer to in product management?

Accepted Answer

The approved time-phased budget used to measure project performance

Answer

The cost baseline is the approved, time-phased budget against which project cost performance is measured and monitored.

Question 3

A product team is estimating a new feature with high uncertainty. They use optimistic (O), pessimistic (P), and most likely (M) estimates. Which formula gives the PERT expected value?

Accepted Answer

(O + 4M + P) / 6

Answer

The PERT formula weights the most likely estimate four times more than the optimistic and pessimistic estimates: (O + 4M + P) / 6.

Question 4

Sunk costs should generally be ignored when making future product investment decisions. Why?

Accepted Answer

They are already spent and cannot be recovered regardless of future decisions

Answer

Sunk costs are irrecoverable past expenditures that should not influence future decisions, which should be based on expected future costs and benefits.

Question 5

Which cost estimation approach involves estimating each individual work package and rolling them up to get the total project cost?

Accepted Answer

Bottom-up estimating

Answer

Bottom-up estimating breaks work into the smallest components, estimates each one individually, then aggregates them for the total estimate.

Product Management Practice Test

Product Management Practice Test

Product Management Product Management: Cost Estimation 2