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File: ch01, Chapter 1: The World of Project Management

True/False



1. A primary purpose of forming projects is to assign the responsibility for accomplishing
some organizational task to a specific person or small group.

Ans: True
Response: See page 2
Level: easy



2. One of the few similarities between project management and general management is that
both exist in the well-defined organizational structure of superior/subordinates in the
overall organization.

Ans: False
Response: See page 3
Level: medium



3. While general managers have their authority limited to specific areas in the overall
organization, project managers have authority over any activity required by the project.

Ans: False
Response: See page 3
Level: medium



4. Projects are always carried out under conditions of uncertainty.

Ans: True
Response: See page 6
Level: easy



5. One can trade-off time and cost when managing a project, but the projects technical
specifications must be maintained exactly as the client initially specifies.

2
Ans: False
Response: See page 6
Level: medium



6. Nonnumeric project selection methods are only suitable if numeric methods are not
available.

Ans: False
Response: See page 17
Level: medium



7. In general, financial methods are inadequate for selecting projects.

Ans: True
Response: See page 14
Level: medium



8. When using financial methods for selecting projects, the payback period is the simplest
and best method to use.

Ans: False
Response: See page 11
Level: medium



9. A disadvantage of using the discounted cash flow method (or net present value method)
for selecting projects is that it cannot be adjusted to account for inflation.

Ans: False
Response: See page 11
Level: medium



10. A disadvantage of using the payback period method for selecting projects is that it
cannot reflect the time-value of money.

Ans: True
Response: See page 11
Level: medium

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11. A disadvantage of using the discounted cash flow method (or net present value) for
selecting projects is that it ignores all non-monetary factors associated with the project.

Ans: True
Response: See page 13
Level: medium



12. A disadvantage of using scoring models for selecting projects is that they are biased to
favor short-run projects.

Ans: False
Response: See page 13
Level: medium



13. A disadvantage of using scoring models rather than financial models for selecting
projects is that they cannot include the projects profitability.

Ans: False
Response: See page 15
Level: medium



14. In general, financial methods for selecting projects are preferable to scoring
models because the former are objective and the latter are basically subjective.
Ans: False
Response: See page 17
Level: medium



15. The main distinction between platform and breakthrough projects is that the former
usually depend on existing technology.

Ans: True
Response: See pages 27-28
Level: medium



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16. The main distinction between platform and derivative projects is that the latter depend
on existing technology.

Ans: False
Response: See pages 27-28
Level: medium



17. A key deficiency of the aggregate project plan is that it provides little information about
the resources committed to the various projects.

Ans: False
Response: See page 28
Level: medium



18. One reason for the emphasis on project management is that tasks fit neatly into
business-as-usual.

Ans: False
Response: See page 1
Level: easy



19. Programs are subdivisions of projects.

Ans: False
Response: See page 2
Level: easy



20. Projects are subdivisions of programs.

Ans: True
Response: See page 2
Level: easy



21. A similarity between project management and general management is the tendency
to manage by exception.

Ans: False

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Response: See page 3
Level: medium



22. Project budgets are primarily modifications of budgets for the same activity in the
previous period.

Ans: False
Response: See page 3
Level: medium



23. In project management, superior-subordinate relationships are known and lines of
authority are clear.

Ans: False
Response: See page 3
Level: medium



24. Having responsibility for the outcome of a project without the authority of rank or
position is common in project management.

Ans: True
Response: See page 3
Level: medium



25. Negotiating the purchase of a new car would typically be characterized as win-win
negotiation.

Ans: False
Response: See page 4
Level: medium



26. In project management, it is often necessary to trade-ff one objective for another.

Ans: True
Response: See page 5
Level: easy

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27. The construction of a house would likely follow a J-shaped lifecycle.

Ans: False
Response: See page 7
Level: medium



28. A project that is selected because it is necessary for continued operations exemplifies a
sacred cow.

Ans: False
Response: See page 9
Level: medium



29. The comparative benefits method is considered a nonnumeric project selection method.

Ans: True
Response: See page 9
Level: medium



30. When using the weighted scoring model, the categories for each scale must be in equal
intervals.

Ans: False
Response: See page 15
Level: medium



31.Scoring methods were developed to overcome some of the disadvantages of simple
financial profitability methods.

Ans: True
Response: See page 14
Level: medium



32. One limitation of scoring methods is that they can only incorporate quantitative data.


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Ans: False
Response: See page 15
Level: medium



33. As a rule of thumb, the number of factors included in a scoring model should be at least
10.

Ans: False
Response: See page 14
Level: medium



34. In Crystal Ball, a cell that contains a parameter we make assumptions about is called a
forecast cell.

Ans: False
Response: See page 20
Level: medium



35. R&D projects are oriented toward using newly developed technologies or existing
technologies in a new manner.

Ans: True
Response: See page 28
Level: medium



36. Projects with deliverables that are incrementally different from existing offerings are
classified as platform projects.

Ans: False
Response: See page 27
Level: medium



Multiple Choice



37. Which of the following are projects?
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a) the design and development of a new product
b) gathering and entering employment data for a Bureau of Labor Statistics quarterly report
c) producing a car on an automobile assembly line
d) a and b above.
e) a, b, and c above.

Ans: a
Response: see page 2
Level: medium



38. Which of the following can be included in scoring models for selecting projects?
a) potential profitability of the project
b) potential impact on the firms competitive position
c) the organizations ability to market the output of a project
d) All of the above can be included
e) only a and b above

Ans: d
Response: See page 15
Level: medium



39. Given a hurdle rate of 12% and an expected inflation rate of 2%, the discount
factor for the second year of a projects life is:
a) .77
b) .88
c) 1.14
d) 1.30
e) cannot be determined

Ans: a
Response: See page 11
Level: medium



40. If the initial investment is a project is $100,000 and the expected annual net profit
for the project is $20,000, the payback period is:
a) 5 years
b) 4 years
c) One fifth of a year
d) 10 years
e) insufficient information to determine the payback period


9
Ans: a
Response: See page 11
Level: medium



41. Which of the following is not a characteristic of a project?
a) They are unique.
b) They are routine.
c) They have specific due date.
d) They have a specific deliverable.
e) They have a purpose.

Ans: b
Response: See page 1
Level: medium



42. Which of the following would not be considered a project?
a) placing the weekly replenishment order
b) a political campaign
c) constructing a new office building
d) developing a new cancer treatment.
e) writing a new textbook

Ans: a
Response: See page 1-2
Level: easy



43. A subdivision of a program is a(n)
a) task.
b) activity.
c) project.
d) budget.
e) action plan.

Ans: c
Response: See page 2
Level: medium



44. Searching for the third alternative is most closely associated with
a) win-win negotiation
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b) project planning
c) project budgeting
d) the three goals of a project
e) the weighted scoring model

Ans: a
Response: See page 4
Level: medium



45. Which of the following is not related to the three goals of a project?
a) time
b) data
c) schedule
d) cost
e) performance

Ans: b
Response: See page 5
Level: medium



46. Projects that begin with a slow start, have quick momentum in the middle, and have a
slow finish are said to follow which type of lifecycle?
a) J-shaped lifecycle
b) L-shaped lifecycle
c) an exponential growth lifecycle
d) an S-shaped lifecycle
e) an X-shaped lifecycle

Ans: d
Response: See page 7
Level: medium



47. Which of the following is a nonnumeric project selection method?
a) Q-sort method
b) payback period
c) discounted cash flow method
d) real options
e) scoring methods

Ans: a
Response: See page 9

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Level: medium



48. Which of the following is a numeric project selection method?
a) comparative benefits
b) payback period
c) Q-sort method
d) operating/competitive necessity
e) sacred cow

Ans: b
Response: See page 9
Level: medium



49. In Crystal Ball, cells that contain outcomes we are interested in are called
a) assumption cells
b) distribution cells
c) forecast cells
d) decision cells
e) define cells

Ans: c
Response: See page 20
Level: medium



50. A matrix that illustrates the magnitude of both product and process changes
resulting from a project is called
a) the aggregate project plan
b) the product-process matrix
c) the aggregate master production schedule
d) the balanced scorecard
e) the R&D project portfolio

Ans: a
Response: See page 27
Level: medium



51. The ____________ attempts to link the organizations projects directly to the goals and
strategy of the organization.
a) the product-process matrix
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b) the balanced scorecard
c) the action plan
d) project portfolio process
e) the work breakdown structure

Ans: d
Response: See page 26
Level: medium



Short Answer



52. Briefly explain what a project is.
Response: See pages 1-2


53. Contrast the terms project, program, and task.

Response: See pages 1-2



54. To what extent can the three goals of a project be traded-off for one another?

Response: See page 5



55. Briefly explain the difference between win-win and win-lose negotiation.

Response: See page 4



56. Why is skill in win-win negotiation necessary for the project manager?

Response: See page 4



57. Briefly describe each of the three fundamental goals of a project.


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Response: See page 5



58. Briefly describe the two different life cycles of projects.

Response: See pages 6-8



59. Briefly describe how a Q-sort is performed.

Response: See page 10



60. Briefly explain the advantages of using scoring models to evaluate and select projects
rather than using financial models.

Response: See page 13



61. The formula for calculating weighted scores for a set of projects is

S
i
=

j
s
ij
w
j

Briefly explain the meaning of each element in the model.

Response: See page 16



62. Briefly differentiate between derivative and breakthrough projects as defined by
Wheelwright and Clark.

Response: See page 27-28