30 Questions
What is the purpose of budgeting in an organization?
To allocate scarce resources to various endeavors
What does a budget imply?
Constraints on resources
What does a higher budget relative to cost imply?
Higher managerial support for the activity
What is the budget in terms of monitoring and control?
A monitoring and control mechanism
What are some examples of rules of thumb for estimating project budgets?
Construction cost by square feet
What is the advantage of top-down budgeting?
Overall project budgets can be set/controlled very accurately
What is the disadvantage of top-down budgeting?
More difficult to get buy in
What is the advantage of bottom-up budgeting?
Greater buy in by low level managers
What is the disadvantage of bottom-up budgeting?
People tend to overstate their budget requirements
What is reserve analysis in the context of budgeting?
Contingency reserve and management reserve
What type of analysis is useful for evaluating projects and can handle both threats and opportunities?
Monte Carlo Simulation
Which type of analysis is also referred to as 'What-if' analysis and can be used for quantitative and qualitative models?
Sensitivity Analysis
What should be done if a loss is catastrophic and insurance isn't available?
Contingency Planning
What type of analysis gives a picture in terms of costs and times that will be affected?
Monte Carlo Simulation
What is the weakness of sensitivity analysis, according to the text?
A single change in environment doesn't happen
What is recommended to avoid if a project is to be supported, according to the text?
Full-cost philosophy
What is useful for evaluating projects and should be supported if NPV is positive and is the best use of funds?
Monte Carlo Simulation
What is recommended if a loss is catastrophic and the probability is low?
Risk Analysis
What is the process that includes going back into the model to change one parameter and see the impact on the final result?
Sensitivity Analysis
What should be done if a loss is catastrophic and insurance isn't available, according to the text?
Contingency Planning
What is the total hourly cost of a project technician including overhead charges?
$32.20
Which budgeting technique involves preparing, comparing, and negotiating?
A combination of top-down and bottom-up budgeting
What is the purpose of program budgeting in the context of projects?
To accumulate data by activity
What is the role of a professional cost estimator in project budgeting?
To reduce uncertainty in cost estimation
What is the typical duration required for analyzing project bids and RFPs?
Weeks or months
What does a learning curve in project management represent?
The improvement in human performance with task repetition
Which risk category is typically influenced by technology and environmental factors?
External risks
What is the focus of project risk management?
Risk attitude, communication, and various subprocesses
Which technique is not a part of quantitative risk analysis?
Program budgeting
What is the potential consequence of implementing new systems in project management?
Technological shock that may delay efficiency realization
Study Notes
Project Management and Budgeting Techniques
- Project technicians are paid at a rate of $17.50 per hour, with overhead charges at 84% of direct labor costs.
- Most projects use a combination of top-down and bottom-up budgeting, which are prepared, compared, and negotiated.
- Organizations are used to budgeting and collecting data by activity, leading to the development of program budgeting for projects.
- Project budgeting typically involves accumulating data and controlling expenses differently from traditional budgeting methods.
- Cost estimation for a project requires inputs from various areas and may involve a professional cost estimator to reduce uncertainty.
- Project bids and requests for proposals (RFPs) require detailed analysis and can take weeks or months to complete.
- Learning curves, which represent human performance improvement with task repetition, are calculated using a fixed percentage known as the learning rate.
- New systems may promise efficiency, but it may take time to realize due to a technological shock.
- Project risk management involves considerable interest and focuses on risk attitude, communication, and various subprocesses such as risk identification and response planning.
- Types of project risks include preventable, strategy, and external risks, which are dependent on technology and environmental factors.
- Risk management involves qualitative risk analysis for prioritizing risks, constructing a risk matrix, and categorizing international project risks.
- Quantitative risk analysis techniques include failure mode and effect analysis, decision tree analysis, and simulation for more precise risk assessment and response planning.
Test your knowledge of project management and budgeting techniques with this quiz. Explore topics such as project budgeting methods, cost estimation, bid analysis, learning curves, technological shocks, and risk management strategies. Sharpen your understanding of project budgeting and risk analysis to excel in project management.
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