Project Management Exam 2 Chapter 7 Budgeting  In order to develop a budget, the PM must forecast: the resources required, when resources will be needed, and the cost of the resources. (All of the above)  A work element whose cost is fully developed would include direct costs plus overhead and G&A charges.  If projects include repetitive tasks with significant human input, the learning rate should be factored into the cost estimate.  Project budgeting aggregates income and expenditures by project or program, often in addition to aggregation by organizational unit or activity.  Direct costs vary with output  Indirect costs are not associated with any specific product or class of products and are typically charged as a fixed percentage of some direct cost  Unless the project manager is familiar with the firm’s accounting system it will be very difficult to exercise budget control  Research suggests that lower level managers and project team members believe that senior managers have a strong bias towards under estimating cost.  The bottom-up budgeting form of budgeting has the advantage of using individuals closer to the work to provide estimates of resource requirements  A possible reason for the poor record of project cost overruns is: scope creep, project managers use optimistic cost estimates, project managers are unaware of some costs. ( All of the above)  The authors identify random and systematic estimation errors as the two types of generic estimation errors  The pattern of deviations in cost and usage used for exception reporting to management is called variances.  An easy method of evaluating risk in certain situations by modifying project parameters and evaluating the corresponding changes is Monte Carlo simulations When we do a Monte Carlo simulation, we put a probability distribution on which of the following?