What is a budget contingency and what are three reasons it might be useful?
What will be an ideal response?
A budget contingency is the allocation of extra funds to cover uncertainties and improve the chances that the project can be completed within the timeframe originally specified. Contingency money is added to the project's budget following the identification of all project costs. The author identifies four reasons why it might make sense to include contingency funding in project cost estimates:
Project scope is subject to change — as the project moves through its development cycle, external events or internal forces can require or call for a change in scope beyond what was initially planned for.
Murphy's Law is always present — if something can go wrong, it will, and this unfortunate circumstance necessitates additional funds to fix the problem.
Cost estimation may not have anticipated interaction costs — one event or work package interacts with another that requires more work from the first. This iteration can be accommodated with contingency funds.
Normal conditions are rarely encountered — projects are planned for a "normal" set of operating conditions and quite often, the abnormal occurs.
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A. The cash paid to bondholders will be $2,000 each interest period. B. Copper's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. C. Copper will receive $98,000 as the issue price. D. Copper's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.
At the maturity of the product life cycle, competition is generic and the job of the marketing manager is to convince potential customers that the new product satisfies their needs better than an existing substitute
Indicate whether the statement is true or false