Cash‑flow analysis primarily allocates costs to the periods when:

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Question restatement: Cash‑flow analysis primarily allocates costs to the periods when:

Option 1: 'Resource hours are planned to be used' – This statement focuses on planning inputs or activities, not the timing of cash movements. Cash flow tracks when money leaves or enters, not when resources are scheduled to be consumed, so this option misaligns with cash‑flow timing.

Option 2: 'Work is planned to occur' – Similar to resource planning, this centers on scheduling work activities. While work plans influence when costs arise, cash‑flow analysis is specifically concerned with the actual cash outflows and inflows, i.e., the monetary timing, rather than the generic occurrence of work.

Option 3: 'Payments actually leave the cost account (outgoing funds)' – This describes the essential essence of cash flow: the timing of real cash disbursements. Cash‑flow analysis assigns costs to periods based on when payments are made, not merely when a commitment is made or when resources are consumed.

Option 4: 'Materials are budgeted in the WBS' – A Work Breakdown Structure (WBS) budgeting relates to planning and budgeting of material needs, not the precise timing of cash payments. While budgeting informs expected cash requirements, it does not by itself define the actual cash flow timing.

Elaborating the distinctions: The core idea of cash flow is the calendar timing of actual cash movements, i.e., when money leaves the firm’s accounts. Planning and scheduling (options 1, 2, and 4) influence expectations but do not determine when cash physically leaves the cost accounts. Only option 3 ties the allocation to the real cash outflow events, aligning with the fundamental purpose of cash‑flow analysis.

In a practical sense, misinterpreting cash flow as merely when work occurs or when resources are planned leads to the common error of assuming costs appear in the same period as activity, whereas true cash flow requires matching costs to the periods of actual payments.

Thus, the correct understanding is that cash‑flow analysis primarily allocates costs to the periods when payments actually leave the cost account (outgoing funds).

PMGT1865 (ND) Final Quiz

Cash‑flow analysis primarily allocates costs to the periods when:

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