Cost Estimating Techniques for Project Cost Management

Question 1

In bottom-up cost estimating, costs are estimated by:

Accepted Answer

Breaking down project tasks and estimating individual costs

Answer

Using historical data

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Applying industry-standard formulas

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Comparing costs to similar projects

Question 2

Analogous cost estimating is most suitable for projects that are:

Accepted Answer

Highly similar to previous projects

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Large and complex

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Have limited historical data

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Involve significant research and development

Question 3

The term used to describe the process of identifying and quantifying project costs is:

Accepted Answer

Cost estimating

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Budgeting

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Cost analysis

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Resource allocation

Question 4

A cost estimate prepared during the project planning phase is commonly referred to as a:

Accepted Answer

Preliminary estimate

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Detailed estimate

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Baseline estimate

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Final estimate

Question 5

Contingency funds in project cost estimates are primarily intended to:

Accepted Answer

Cover unforeseen events and risks

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Fund additional scope that may be added later

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Compensate for changes in material or labor costs

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Pay for project management fees

Question 6

Which cost estimating technique establishes relationships between project parameters and costs based on historical data?

Accepted Answer

Parametric estimating

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Bottom-up estimating

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Analogous estimating

Question 7

In bottom-up cost estimating, what is the initial step?

Accepted Answer

Identifying work packages

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Estimating individual work package costs

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Summing individual costs

Question 8

What is the primary objective of cost estimating in project management?

Accepted Answer

Predicting future project costs

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Distributing funds

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Monitoring actual costs

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Comparing project alternatives

Question 9

Which statement about parametric cost estimating is NOT true?

Accepted Answer

Highly precise

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Quick and efficient

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Data requirements are minimal

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Less prone to bias

Question 10

How does the bottom-up cost estimating technique calculate the cost of project work packages?

Accepted Answer

By adding up the estimated costs of individual tasks and activities within each work package

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By using past project data to predict future costs

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By referencing industry standards and benchmarks to estimate costs

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By first estimating the total project cost and then dividing it among the work packages

Question 11

Which cost estimating technique involves dividing a project into smaller tasks and estimating costs for each task individually?

Accepted Answer

Bottom-up estimating

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Parametric estimating

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Analogous estimating

Question 12

Which of the following does NOT influence the accuracy of cost estimates?

Accepted Answer

Project team's communication skills

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Availability of reliable data

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Estimator's experience

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Project complexity

Question 13

The type of cost estimate with the highest level of precision is:

Accepted Answer

Definitive estimate

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Order-of-magnitude estimate

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Budget estimate

Question 14

Direct costs are different from indirect costs because:

Accepted Answer

Direct costs are directly related to the project, while indirect costs are not.

Answer

Indirect costs are directly related to the project, while direct costs are not.

Answer

All project costs are direct costs.

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All project costs are indirect costs.

Question 15

Identify the option that is NOT a recognized type of cost estimating technique.

Accepted Answer

Iterative

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Analogous

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Bottom-up

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Parametric

Question 16

Parametric cost estimating is advantageous primarily because it offers:

Accepted Answer

Enhanced accuracy and reliability in cost estimation

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Suitability for intricate and exclusive projects

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Reduced expenses and time consumption

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Exceptional flexibility and customization options

Question 17

During the planning phase of a project, which type of cost estimate is typically developed?

Accepted Answer

Order-of-magnitude estimate

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Detailed estimate

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Budget estimate

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Final estimate

Question 18

In bottom-up cost estimating, a common approach for developing the estimate is through the use of:

Accepted Answer

Work breakdown structure (WBS)

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Analogy

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Cost aggregation

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Regression analysis

Question 19

Parametric cost estimating relies on historical data to estimate project costs. What is a major drawback of using this technique?

Accepted Answer

Requires extensive relevant historical data

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May be less precise than other methods

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Challenging to apply to intricate projects

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Time-consuming to implement

Question 20

Which cost estimating technique leverages historical information from comparable projects?

Accepted Answer

Analogous

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Three-point

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Bottom-up

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Parametric

Question 21

Parametric cost estimating relies on:

Accepted Answer

Established relationships between project characteristics and associated costs

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Historical data from similar projects

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Detailed analysis of project activities

Question 22

Identify the option that is NOT an advantage of using the bottom-up cost estimating technique.

Accepted Answer

Potentially lower accuracy compared to other methods

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Produces detailed and granular estimates

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Flexibility in adjusting estimates based on project progress

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Readily accommodates project scope changes

Question 23

In the context of cost estimating, the term 'contingency' refers to:

Accepted Answer

A reserve or allowance for unexpected cost occurrences

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A budget line item specifically for unforeseen expenses

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A risk assessment tool

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A method for estimating project duration

Question 24

The primary purpose of the reserve analysis technique is to:

Accepted Answer

Determine the likelihood of cost overruns and the necessary contingency fund requirements

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Estimate the project's overall budget

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Identify potential areas for cost savings

Question 25

The process of refining cost estimates as the project progresses is known as:

Accepted Answer

Cost control

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Earned value management

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Risk analysis

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Value engineering