Project Initiation

Answers and Explanations

A1:	Answer C is correct because the opportunity cost is the lost money that she could have been paid for the other event if she was the speaker. Therefore, Answers A, B, and D are incorrect.
A2:	Answer D is correct because a project manager is not given functional authority in the charter. Answer A is incorrect because the charter should include a description of the business need(s) that the project will meet. Answer B is incorrect because the project charter does authorize the beginning of the project. Answer C is incorrect because the project charter does give the project manager the authority to go forward with the project.
A3:	Answer D is correct because the initiation phase is the first step in the scope management process and the Project Management process. The process of performing this initial analysis for a project should be considered a separate project and not part of the initiation phase of the project. Answer B is incorrect because the initiation phase is the first step in the project life cycle. Answer C is incorrect because it is not necessarily the stakeholders' responsibility to be a resource for the initiation of the project, unless they are team members.
A4:	Answer B is correct. Answer A is incorrect because without satisfied customers, we do not have potential for new projects. Answer C is incorrect because the change control management process would have likely resolved this problem. Answer D is incorrect because it is the project manager's responsibility to seek communication with the customer to set realistic expectations.
A5:	Answer A is correct. Not all branches of the WBS have to be decomposed to the same level, although each succeeding level generally has more detail. Answer B is incorrect because a task is not a definitive enough answer to describe the lowest level of the WBS. Answer C is incorrect because deliverables are the outputs of the project processes and not involved with the different levels of the WBS. Answer D is incorrect because a work product is described as a process output and not a term that would be used to describe the lowest level of a WBS.
A6:	Answer C is correct. The product description is one of the three minimal requirements of the project charter, as described by the PMBOK. The charter should also include a description of the business need(s) that the project will meet. The other choices in this question might appear in some organization's charters; however, they are not the correct answers for the test question. Therefore, Answers A, B, and D are incorrect.
A7:	Answer D is correct and illustrates the utilization of a cost benefit analysis. Answer A is incorrect because constrained optimization is a mathematical approach that uses math models and complex criteria in the selection process and is not the appropriate response to this question. Answer B is incorrect because earned value is the value of the work actually performed and not a project selection method. Answer C is incorrect because standard deviation evaluation is not a project selection method, although some of the standard deviation reports may be inputs to the project selection process.
A8:	Answer C is correct. Answer A is incorrect because the project manager cannot establish the business need alone. Remember that the charter is issued by someone external to the team. Answer B is incorrect because the project charter does not require a preliminary schedule and budget. Answer D is incorrect because the Project Management approach would be defined in the project plan.
A9:	Answer B is correct. Corrective actions are part of the process after establishing objectives and checking on the objectives. The next step is to take corrective actions. Answers A, C, and D are true statements and therefore are incorrect for this question.
A10:	Answer D is the best answer because utilities would be the least likely to provide expert advice to a not-for-profit organization concerning how to run the organization. Answer A is incorrect because stakeholders can be a valuable resource for expert judgment. Answer B is incorrect because industry groups frequently support not-for-profit organizations and can be a good information source. Answer C is incorrect because the government regulatory agencies frequently support and monitor not-for-profit organizations.
A11:	Answer D is correct. Remember the importance that PMI places on effective communications and on "doing the right thing." Answers A and C are incorrect because these would not be the best actions to take next in this situation. It is the project manager's responsibility to present all the necessary information to the sponsors and stakeholders so that they can make decisions that are in the best interest of the project, quality, and the timeline. Answer B is incorrect because the "lack of senior management approval" issue has not been dealt with yet and resolution should be pursued so the project can go forward.
A12:	Answer A is correct. The most important factor is that the project selection method be "realistic" for the organization. It needs to be consistent with its goals and objectives, and it needs to account for the capabilities of the organization. Answers B, C, and D are all incorrect because although they are key criteria when choosing a project selection model, they are irrelevant if the model is not first an effective organizational fit.
A13:	Answer C is correct. The payback period is how long it takes to recoup your investment. In this example, the cost was $4,000,000 and the savings was $800,000 per year. $4,000,000/$800,000 = 5. Therefore, Answers A, B, and D are incorrect.
A14:	Answer B is correct. A negative NPV is unfavorable because this means that cash outflows are higher than the value of cash inflows. Answer A is incorrect because a positive NPV is favorable. Answer C is incorrect because the higher the NPV, the better. Answer D is incorrect because IRR is not associated with NPV.
A15:	Answer A is correct. The internal rate of return (IRR) is the interest rate that makes the net present value of all cash flows equal zero. Answer B is incorrect because the benefit cost ratio identifies the relationship between the cost and benefits of a proposed project. Answer C is incorrect because present value (PV) is the value today of future cash flows. Answer D is incorrect because earned value is the work accomplished plus the authorized budget for the work. It is the sum of the approved cost estimates for activities completed during a given time period. This was previously called the budgeted cost of work performed (BCWP).
A16:	Answer B is correct. The deliverables and constraints are identified during the initiation phase as the inputs into the planning phase. Answer A is incorrect because team member selection is done during the planning phase of the project. Answer C is incorrect because a risk analysis is generally prepared during the planning phase of a project. Answer D is incorrect because the communication plan is also generally developed during the planning phase.
A17:	Answer C is correct. The approach of goal/objective setting and periodic evaluations is common to both MBWA and Project Management. Answer A is incorrect because projects use more than functional management hierarchy structures. Answer B is incorrect because Project Management is focused on executing organizational objectives and not on setting them. Answer D is incorrect in much the same way that Answer A is incorrect. You cannot rely on a top-down organizational flow in project environments.
A18:	Answer D is correct because a sunk cost is a project expense that will eventually need to be paid. Answer A is incorrect because a fixed cost remains constant, regardless of any change in a company's activity. Answer B is incorrect because a direct cost can be directly linked to producing specific goods or services. Answer C is incorrect because a variable cost changes in proportion to a change in the company's activity or business.
A19:	Answer B is correct. Multiobjective programming is the only constraint optimization method that is listed. Answers A, C, and D are all incorrect because they are not constraint optimization methods.
A20:	Answer D is correct. Answer A is incorrect because straight-line depreciation is not tied with direct costs. Answer B is incorrect because indirect costs are not associated with straight-line depreciation. Answer C is incorrect because the interest rate does not impact straight-line depreciation.
A21:	Answer A is correct. Answer B is incorrect because the standard deviation is not associated with current assets or liabilities. Answer C is incorrect because actual cost of work performed is not linked to current assets or liabilities. Answer D is incorrect because the estimate at completion (EAC) is utilized for this example.
A22:	Answer C is correct. The other answers could be accurate in specific situations, but their role alone does not meet the key criterion of being "external" to the project team. Answers A, B, and D are incorrect because these individuals are not external to the project.
A23:	Answer B is correct. In order to calculate the cost of the auto part, you need to know all of the costs associated with this part, which are not provided in this problem. Although there is a lot of information provided in this example, it does not provide enough information to determine a per-item cost. In order to determine the cost to manufacture each item, you need to know all costs that are directly related to the production of that specific item. Therefore, Answers A, C, and D are incorrect.
A24:	Answer C is correct. This acronym is frequently used in textbooks inside and outside of Project Management circles to explain why it is vital that you quantify objectives, set due date time frames, and assign responsibility for tasks. This common-sense approach to defining objectives can be a positive tool for a project manager. Answers A, B, and D are all incorrect because they are not the definition or the concept of SMART goals.
A25:	Answer D is correct. Early Project Management was tied with aerospace and government defense departments. The emphasis upon engineers and engineering tools was closely tied to the Project Management profession for a long time until Information Technology began to place a heavy emphasis on its utilization for the development and implementation of IT projects. In today's Project Management world, there is a heavy emphasis on Information Technology projects because many of them involve new development and a certain amount of ambiguity.
A26:	Answer D is correct. Every project has the highest level of risk and uncertainty at the initiation of the project. This is due to the fact that few, if any, of the deliverables have been provided and the milestones have not been met at the beginning of a project. As milestones are met and deliverables are provided, the risk and uncertainty decreases as you develop successes for the project. Your risk generally decreases as you proceed from the initiation phase to the planning phase to the executing phase and closeout. Therefore, Answers A, B, and C are incorrect.
A27:	Answer C is correct. Answer A is incorrect because the business requirements document does not provide project execution details that are contained in the charter. Answer B is incorrect because an executive summary generally is a brief overview of the project and does not provide granular details about the actual implementation and deliverables. Answer D is incorrect because a Gantt chart is used to show timelines for the various tasks associated with the project.
A28:	Answer B is correct. Answers A, C, and D are incorrect because they are defined by the PMBOK as scope management processes, including initiation, which is the first step in the scope management process.
A29:	Answer C is correct. The scope statement can be developed by the functional manager, or any other manager besides the project manager, during the initiation phase of the project. Answer A is incorrect because a scope statement does include these items. Answer B is incorrect because the scope statement is not directly affiliated with the work breakdown structure (WBS). Answer D is a true statement and therefore incorrect for this question. The scope statement is not the basis for a contract between the buyer and seller and is therefore not the correct response in this situation.
A30:	Answer C is correct. Project authorizations should not be exclusively based upon the impact of an executive's bonus (many people would agree that it should not ever be based upon an executive's bonus). Answers A, B, and D are common events that predicate the need for project authorization and can evolve into large scope projects.
A31:	Answer A is correct. The charter is not an input into the project initiation process. Inputs to the project initiation process are a product description, a strategic plan, a project selection criteria, and historical information. Answers B, C, and D are inputs into the initiation process and therefore incorrect for this question.
A32:	Answer B is correct. Answers A, C, and D are not tools and techniques used during the initiation process.
A33:	Answer C is correct. Initiation is the first step in the scope management process, and expert judgment is one of the techniques routinely utilized. Answers A, B, and D are incorrect because they would come after the initiation process.
A34:	Answer C is correct. Answer A is incorrect because constraints limit your options. Answer B is incorrect because it's not the correct process for adjusting project baselines. Answer D is incorrect because, although it's a tempting answer based on real-world experience, it's not the answer PMI is looking for, and it would be more applicable to project controlling.
A35:	Answer A is correct. The project manager should be assigned to a project as early as possible in order to allow him the opportunity to participate in the planning aspects of the project. Answer B is incorrect because the stakeholders are generally not the people that choose the project manager. Answer C is incorrect because just the opposite is correct, and the project manager should definitely be assigned to the project before the project planning is complete. Answer D is incorrect because the work breakdown structure does not mandate when the project manager will be assigned.
A36:	Answer B is correct. The project charter is one of the most important outputs of the initiation phase. Answer A is incorrect because the scope statement is not one of the outputs of the initiation phase. Answer C is incorrect because a change request is generally developed after the initiation phase of the project, not during it. Answer D is incorrect because the status report is the output of the execution phase of a project.
A37:	Answer D is the best answer. A benefit cost ratio (BCR) that is lower than 1.0 is unfavorable because you are spending more money than you are receiving benefits. Answer A is incorrect because the project manager should review the project to determine whether it should go forward and develop ways to increase the BCR to 1.0 or more. Answer B is incorrect because the BCR should not be reduced to zero. A BCR of zero indicates that the project does not have any benefits associated with the expenses of a project. Answer C is incorrect because the project will not likely be successful, unless there are benefits that outweigh the expenses and effort associated with the completion of the project.
A38:	Answer C is correct. The internal rate of return (IRR) is the return that the company would earn if it invests in the project. Answer A is incorrect because prioritization of financial outcomes is not a PMI term and not an appropriate response for this question. Answer B is incorrect because the future value (FV) is not associated with the internal rate of return. Answer D is incorrect because the present value is the value today for future cash flows.
A39:	Answer D is the best answer. Technological advances, market demand, customer requests, and legal requirements are some of the triggers that signify the need to authorize a project. Answer A is correct but not the best answer for this question. Answer B is incorrect because scope creep is not associated with the project authorization process. Answer C is incorrect because any advancement that can have a positive impact upon a project should be incorporated into projects as soon as they are available.
A40:	Answer C is correct. The project details and description will usually have less detail at the beginning of the project and will increase as the characteristics are progressively elaborated. Answer A is incorrect because the team should confirm that they understand the essence of the scope of the project, even if the details might be ambiguous at the beginning of the project. Answer B is incorrect because the project should go forward; however, the team should request further clarification of what the project scope entails. Answer D is incorrect because the project selection criteria should be established before the project begins.
A41:	Answer B is correct. The product description provides the characteristics of the service or product that the project was utilized to develop. Answer A is incorrect because project definition is not an official PMI or PMBOK term. Answer C is incorrect because a scope statement is a document that provides the description of what the project entails. Answer D is incorrect because the strategic plan is the input into the initiation process along with the strategic plan, project selection criteria, and historical information.
A42:	Answer C is the best answer. An SME (subject matter expert) provides expertise and advice to the team for the project. Expert judgment and project selection methods are tools and techniques that are utilized during the initiation of a project. Answers A, B, and D are incorrect because they are not tools and techniques that are utilized during the initiation process.
A43:	Answer D is correct. Assumptions have an inherent amount of risk and should be evaluated during the initiation phase to determine the potential impact upon the project. Answer A is incorrect because assumptions are not baselined in a project. Answer B is incorrect because assumptions do not generally limit the team's options; however, constraints can limit the team's options. Answer C is incorrect because assumptions are not correlated with the project responsibilities and do not impact the overruns on a project.
A44:	Answer D is correct. Life cycle costing includes the costs from each phase of the project life cycle when the total investment costs are calculated. Answer A is incorrect because an opportunity cost is the difference between a chosen investment and the one that is passed up. Answer B is incorrect because sunk costs are costs that have been incurred and cannot be reversed. Answer C is incorrect because net present value (NPV) is the present value of cash inflows (benefits) minus the present value of cash outflows (costs).
A45:	Answer A is correct. The project charter should be developed by someone who is external to the project. Sometimes this external person actually becomes the project sponsor and provides support to the project because she either originated the idea for the project or worked with the originator. Answers B and C are incorrect because these individuals are not external to the project. Answer D is incorrect because a government official associated with a vendor would not be involved with the development of a charter.
A46:	Answer D is correct. Straight-line depreciation is a method of depreciation that divides the difference between an asset's cost and its expected salvage value by the number of years it is expected to be used. Therefore, the calculation is ($4,500 [cost]) ($0 [salvage value at obsolescence])/10 years = $450 per year.
A47:	Answer D is correct. A fixed cost is a constant expense, regardless of the level of activity within the company and does not vary based upon the level of output. Answer B could be correct because a lease payment is a direct cost, but it is not associated with a product in this case, so it is not the best answer. Answer C is incorrect because variable costs are generally associated with the manufacture of a product, and vary with the volume of product produced.
A48:	Answer D is correct. Constraints are factors that can limit the options of the team and need to be identified so they can be evaluated for their impact upon the outcomes of the project. Answer A is incorrect because milestones are goal-related achievements and not applicable to this question. Answer B is incorrect because assumptions are factors that are considered to be true, real, or certain. Answer C is incorrect because inputs are the project-related efforts and contributions that are related to outputs, tools, and techniques.
A49:	Answer B is the best answer. The experience that Louie had with the previous product life cycle is the knowledge that he can draw upon to anticipate similar results in the future. Answer A is not correct because Louie would not necessarily be considered an expert, especially if he had limited experience in that area. Answer C is incorrect because demographic studies involve the analysis of various groups of individuals to evaluate what categories they can be broken into and is not applicable to this situation. Answer D is incorrect because a strategic plan is involved as an input into the initiation process and is more related to the support of the performing organization's goals than the prediction of future sales of potato chips.
A50:	Answer D is correct. Because the change control process occurs during the entire project, from initiation to closeout, the initiation phase is the first step in the scope management process, and SMEs provide input as a tool during this phase. Answer A is incorrect because the scope verification process occurs after the initiation phase, when the SME's input is needed. Answer B is incorrect because scope planning occurs after the initiation phase of the project. Answer C is incorrect because the SME's input is needed before the scope definition process of the project.