Project Cost Management Questions

8/10/2019 Project Cost Management Questions

1/29


http://www.pmpden.com/pmbok-5-exam-q uestions/project-cost-manag ement-q uestions/ 1/29

Project Cost Management Questions

Results0 of 105 questions answered correctly

Your time: 00:00:07

You have reached 0 o f 105 points, (0%)

Keep Trying!

Restart quiz View questions

HOME PMBOK 5 EXAM QUESTIONS PAY & REGISTER LOGIN PROFILE CONTACT

1. QuestionYour project has a budget of $10,000 and is expected to last for 1 year, with the work and budget spread evenly across all months. Right now CPI is 0.8. What

is Variance at Completion in this case?

$12,500

-$2,500

$10,000

$12,000

Incorrect

Variance at Completion = BAC EAC Estimate at Completion (EAC) =BAC / CPI = $10,000 / .8 = $12,500 Variance at Completion = $10,000 $12,500 = -$2,500

2. Question

In an underground highway construction project, the project stakeholders have suggested many changes to the project scope. As you have already defined

the cost baseline in your project, you would like to revisit the baseline to see how these changes impact the overall cost of the project. So, you have started

an impact analysis to determine the impact, and inform the concerned stakeholders of all approved changes and the corresponding costs. You must use the

following to carry out such process:

Control Costs

Control Scope

Control Communications

Control Risks

Incorrect

The Control Costs process involves many activities such as influencing the factors that change the cost baseline, managing the actual changes, and

informing stakeholders of approved changes and corresponding costs. Since you are in the process of managing the cost changes and informing them to

the stakeholders, you are in the Control Costs process. [PMBOK 5th edition, Page 215]

3. Question

Lucy is currently preparing a high-level cost estimate for her project in the initiation phase. Given the limited detail available to her, what would you expect

the range of her estimate to be and what would you call such an estimate?
http://www.pmpden.com/http://www.pmpden.com/pmbok-5-exam-questions/http://www.pmpden.com/http://www.pmpden.com/premise-membership/contact/http://www.pmpden.com/premise-membership/member-profile/http://www.pmpden.com/premise-membership/login/http://www.pmpden.com/checkout-option/http://www.pmpden.com/pmbok-5-exam-questions/http://www.pmpden.com/http://www.pmpden.com/


2/29



-5 to +10 %, Narrow

-25 to +25 %, Rough Order of Magnitude


-1 to +1 %, Definitive

Incorrect

During the initial stages of the project, the level of information available will be limited. Hence the Rough Order of Magnitude (ROM) estimate is usually

prepared and has an accuracy range of -25% to +75%. [PMBOK 5th edition, Page 201]

4. Question

The most recent analysis of Microcorps new fabrication facility renovation shows a CPI value of less than 1.0 What does this indicate?

The cost has underrun estimates

The co st has overrun es timates.

The schedule has slipped.

The project is running ahead of schedule.

Incorrect

A CPI value o f less than 1.0 indicates a cost overrun o f the estimates. A CPI value greater than 1.0 indicates a cost underrun of the estimates. [PMBOK 5th

edition, Page 219]

5. Question

Variance analysis refers to cost performance measurements used to assess the magnitude of variation in comparison to the original cost baseline. What is

the trend on the percentage range of acceptable variances as the project progresses?

The percentage range of acceptable variances will tend to decrease first and then increase as the project progresses beyond 50% completion.

The percentage range of acceptable variances remain the same as the project progresses.

The percentage range of acceptable variances will tend to increase as the project progresses.

The percentage range of acceptable variances will tend to decrease as the project progresses.

Incorrect

During the start of the project, larger percentage variances are allowed. However, as more work is accomplished, the percentage range o f acceptable

variances will tend to decrease. [PMBOK 5th edition, Page 222]

6. Question

If you would like to base your project cost estimate on historical data and statistical analysis, which cost estimation technique would you use?

Parametric Estimating

Analogous Estimating

Vendor Bid Analysis

Bottom-up Estimating

Incorrect

Parametric estimating is the process of using historical data to compare against your project to determine a correlation and thereby a cost estimate for

your current project. [PMBOK 5th Edition, Page 205]


3/29



7. Question

You have just started a project. A project team member reports that 20 percent of the project is done. You agree with the completion status, but do not

change any of the progress in your report to the customer. This is an example of which one of the following?

50/50 Rule

Percent Complete Rule

0/100 Rule

20/20 rule

Incorrect

The 0/100 Rule allows for zero percent credit on an activity until it is 100 percent complete. B is wrong (50/50 rule): 50 percent completion when the work

begins and 50 percent when the work is completed.

8. Question

A project manager is trying to p lan for a contingency reserve as part of the cost estimates for the project. Which of these would be an incorrect way to plan

for contingency reserves?

Start the project with a zero value for co ntingency reserve.

Plan for contingency reserve as a fixed number.

Plan for contingency reserve as a percentage of the estimated cost

Use quantitative analysis methods to arrive at the contingency reserve.

Incorrect

It would be incorrect to start the project with a zero value for contingency reserves. One of the three methods listed could be used to arrive at a

contingency reserve number. As more precise information about the project is available, the contingency reserve may be used, reduced or eliminated.

[PMBOK 5th edition, Page 206]

9. Question

You have a piece of equipment that was purchased for your project recently for $5,000 and is expected to last 5 years in production. At the end of the five

years, the expected worth of the equipment is $2,000. Using the straight-line depreciation, what is the amount that can be written off each year?

$600

$1200

$3000

Zero

Incorrect

The straight-line depreciation takes the purchase value of the item, minus the salvage price of the item, divided by the number of time periods. Calculation

is (5000-2000)/5 = $600.

10. Question

What is the present value if the organization expects to make $500,000 three years from now and the annual interest rate is 4 percent?

$26000

$25000

$4000

$5000


4/29



Incorrect

Present Value = FV/(1+R)n. FV is the future value, R is the interest rate, and n is the number of time periods. 500000/(5*5*5) = 4000.

11. Question

An estimating technique that uses a statistical relationship between historical data and other variables (for example, square footage in construction, lines o f

code in software development) is known as:




Historical Analysis

Incorrect

This technique is known as Parametric Estimating and can produce higher levels of accuracy depending on the sophistication, as well as the underlying

resource quantity and cost data built into the model. [PMBOK 5th edition, Page 205]

12. Question

Which of the below statement is true about Earned Value (EV)?

Earned Value (EV) is the physical work completed to date and the authorized budget for that

A ll

It is also called as BCWP (Budgeted Cost of Work Performed.)

It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned

Incorrect

It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned.

Earned Value (EV) is the physical work completed to date and the authorized budget for that. It is also called as BCWP (Budgeted Cost of Work Performed).

13. Question

The formula for Cost Variance is:

CV=BAC-(AC-EV)

CV=EV-AC

CV=SV-BC

CV=AC-EV

Incorrect

CV equals earned value (EV) minus actual cost (AC). [PMBOK 5th edition, Page 218]

14. Question

Which of the below statement is true about Cost Variance (CV)?

Negative CV, this means that the project is over budget

Any difference between the estimated cost of an activity and the actual cost of that activity


5/29



Negative CV, this means that the p roject is over bu dget and Any difference between the estimated cos t of an activity and the

actual cost o f that activity

None

Incorrect

Any difference between the estimated cost of an activity and the actual cost of that activity.

15. Question

You are a project manager who is in charge of an important project for your company. The project is 40% complete after 3 months and has cost $350,000.

The budget for the project is $950,000 and is scheduled to last 8 months. How is the project performing?

The project is behind schedule and over budget.

The project is ahead of schedule and under budget

The project is behind schedule and under budget

The project is ahead of schedule and over budget

Incorrect

CPI=EV/AC CPI=(950,00*40%)/350,000 CPI=380,000/350,000 CPI=1.09(under budget); SPI=EV/PV SPI=380,000/(950,00 x 0.375) SPI=380,000/36,250 SPI=1.07

(ahead of schedule). [PMBOK 5th edition, Page 224]

16. Question

Two efficiency indicators that reflect the cost and schedule performance of a project are:

Cost Performance Index (CPI) and Schedule Performance Index (SPI)

Actual Cost (AC) and Planned Value (PV)

Cost Projection Index (CPI) and Schedule Projection Index (SPI)

Cost Pricing Index (CPI) and Schedule Performance Index (SPI)

Incorrect

The Cost Performance Index (CPI) and the Schedule Performance Index (SPI) are two efficiency indicators in the project to reflect the cost and schedule

performance of the project. [PMBOK 5th edition, Page 219]

17. Question

The Cost Management Plan is an output o f the Plan Cost Management process. This plan is then integrated with other project plans in which of these

processes?

Develop Project Management Plan

Monitor and Control Project Work

Direct and Manage Project Work

Perform Integrated Change Control

Incorrect

The cost management plan is a component o f the project management plan. Once the cost management plan is developed, it is integrated to the projectmanagement plan during the Develop Project Management Plan process. [PMBOK 5th edition, Page 198]

18. Question


6/29



Which of the below statement is true about Cost Performance Index (CPI)?

If CPI is less than 1, this means that the project is over budget

If CPI is less than 1, this means that the project is over budget and also CPI = EV (Earned Value) / AC (Actual Cost)

CPI = EV (Earned Value) / AC (Actual Cost)

None are true

Incorrect

CPI = EV (Earned Value) / AC (Actual Cost) If CPI is less than 1, this means that the project is over budget.

19. Question

You have just been informed by your manager that you must present your project budget at a monthly executive level project review meeting prior to

submitting it for approval by the sponsor. This meeting is nex t week. However, the scope for this project has not yet been finalized, nor has the project

schedule. When you inform your manager of this fact, he advises you to just ballpark your budget. What do you do?

Come up with a rough order of magnitude estimate using parametric estimating technique

Come up with a rough o rder of magnitude estimate using analogo us estimating technique

Come up with a narrow estimate using parametric estimating technique

Come up with a narrow estimate using analogous estimating technique

Incorrect

You should come up with a rough order o f magnitude estimate that is usually referred to as -25% to +75% estimate. You can quickly do this by using

analogous estimating technique. [PMBOK 5th edition, Page 201, 204]

20. Question

You have elected to use bottom-up estimating and will base your estimates on the WBS. Which one of the following is not an attribute of bottom-up

estimating?

People do ing the work create the estimates

Less expensive to do than other methods of estimations

More expensive to do than other methods of estimations

Creates a more accurate estimate

Incorrect

The bottom-up estimating is expensive. It is accurate. Estimating the cost of individual work items and then rolling up the costs to arrive at a project total

is more accurate.

21. Question

What does it mean if the Earned Value is equal to Actual Cost?

Project is on budget and on schedule

There is no co st variance

Schedule Variance Index is 1

There is no schedule variance

Incorrect


7/29



CV = EV AC. If the EV is equal to the AC then there is no cost variance on the project. [PMBOK 5th edition, Page 218]

22. Question

The Earned Value Management methodology can be used as a means to:

Calculate the profitability of the project

Calculate the number of days left in the project

Forecast future performance based on past performance

Calculate the value provided to the customer

Incorrect

The Earned Value Management methodology can be used as a means to forecast future performance based on past performance. [PMBOK 5th edition,

Page 217]

23. Question

A large construction project for a logistics company will require the expenditure of a large amount of capital. The finance group works with the project

manager to project set limits when expenses will be incurred in a g iven project, and determine if there are ways to smooth out or level the spending to avoid

a single large expenditure one quarter and none the next. This is an example of:

Funding Limit Reconciliation

Rescheduling

Levelized Billing

A financial review

Incorrect

Large variations in the periodic expenditure of funds are usually undesirable for organizational operations. Therefore, the expenditure of funds is

reconciled with the funding limits set by the customer or performing organization on the d isbursement of funds for the project. [PMBOK 5th edition, Page

212]

24. Question

A project manager is performing Reserve Analysis as a technique in one of the project management process that he is currently working on. Which of these is

likely to be that process?

Estimate Costs

Report Costs

Estimate Reserves

Plan Costs

Incorrect

Many cost estimators include reserves (also called contingency allowances), as costs in their schedule activity cost estimates. Contingency reserves are

estimated costs to be used at the discretion of the project manager to deal with anticipated but not certain events. These events are known unknowns

and are part of the project scope and cost baselines. [PMBOK 5th edition, Page 206]

25. Question

Variance Analysis is an important tool used in the Control Costs Process. Which of the following statements regarding variances is correct?

The percentage rang e of acceptable variances will tend to decrease as more work is accomplished


8/29



The percentage range of acceptable variances will tend to increase as more work is accomplished

The percentage range of acceptable variances is high at the start of a project, tends to decrease in the middle of a project, and then tends to increase

as the project nears completion

The percentage range of acceptable variances is a constant all through the project

Incorrect

Variances assess the magnitude of variation to the original cost baseline. The percentage range of acceptable variances will tend to decrease as more work

is accomplished and the project nears completion. [PMBOK 5th edition, Page 222]

26. Question

You are a senior project manager working for RETAMART, a retail shopping network that sells various consumer products. As part of the expansion p lan

approved by the board o f directors, you have been assigned as a project manager for a new plant. Due to transportation problems, the project has

undergone delays and the Schedule Performance Index (SPI) is found to be at 0.6 and the cost performance index (CPI) at 0.7. However, you expect some

improvements over next few weeks that may change schedule performance index to 1.1 and cost performance index to 0.9. Which of the following

statements will be true if your anticipated changes materialize?

The project will be on schedule and under budget

The project will be under budget but behind schedule

The project will be overspent but ahead o f schedule

The project will be overspent and behind schedule

Incorrect

The cost performance index above 1 indicates that the project is under budget and the schedule performance index above 1 indicates that the project is

ahead of schedule. If all of your anticipated changes happen to be true, the project will be overspent but ahead of schedule because the schedule

performance index will be greater than 1. [PMBOK 5th edition, Page 219]

27. Question

Which of these are not inputs to the Determine Budget process?

Project schedule, agreements

Co st baseline, requirements traceability matrix

Basis of estimates, activity cost estimates

Project schedule, resource calendars

Incorrect

The cost baseline and the requirements traceability matrix are not inputs to the Determine Budget process. The rest are valid inputs. [PMBOK 5th edition,

Page 208]

28. Question

You are the project manager for the construction of a new Building. Before you begin to determine the budgeting process, which of the following inputs will

help you?

A ll

Activity Costs estimates and project schedule

Contracts

Scope Baseline

Incorrect


9/29



Four determine budget, inputs are: Activity Costs estimates and project schedule, Scope Baseline, Contracts, Basis of estimates and Organizational process

assets.

29. Question

An estimating technique that uses a statistical relationship between historical data and other variables (for example, square footage in construction, lines o f

code in software development) is known as:

Historical Analysis




Incorrect

This technique is known as Parametric Estimating and can produce higher levels of accuracy depending on the sophistication, as well as the underlying

resource quantity and cost data built into the model. [PMBOK 5th edition, Page 205]

30. Question

Funding requirements for a project are usually in incremental amounts that are not continuous, and these appear as a step function in the graph depicting

Cash flow, Cost baseline and Funding. Any gap at the end o f the project, between the funds allocated and the cost baseline represents:

Contingency reserves

Charting error

Management reserves

Cost variance

Incorrect

Management reserves are included in the pro jects total funds but they are not included in the pro jects cost performance baseline. [PMBOK 5th edition,

Page 214]

31. Question

Megawatt is estimating the overall expected cost of a new ERP system deployment project using the actual costs of an earlier similar ERP system deployment

project as the basis for the cost. This is what type of estimating?

Analogous

Bottom-up

Expert Judgment

Parametric

Incorrect

Analogous cost estimating means using the actual cost of previous, similar projects as the basis for estimating the cost of the current project. Analogous

cost estimating is frequently used to estimate costs when there is a limited amount of detailed information about the project (e.g., in the early phases).


32. Question

You are the project manager of an AC Installation Project for a new building. Your BAC is $500,000. You are now 50 percent done with the project, though

your plan called for you to be 55 percent done with the work at this time. What is your earned value?


10/29


http://www.pmpden.com/pmbok-5-exam-questions/project- cost-management-questions/ 10/29

$250,000

$275,000

$500,000

$345,000

Incorrect

The earned value is calculated by multiplying the percentage of completion, 50 percent, by the BAC, which is $500,000, for a value of $250,000.

33. Question

Which statement is true about project cost?

All of the above

The cost of the equipment and materials needed to complete the project work must be factored into the project expenses

Costs associated with projects are not just the costs of goods procured to complete the project.

The cost of the labour may be one of the biggest expenses o f a project.

Incorrect

All are true

34. Question

You will be reporting to management, for the week of 07/15, that your project has an EV of $7700 and a PV of $9600. What is the status of your project?

Ahead of Schedule

On schedule

Not enough information provided

Behind Schedule

Incorrect

Your project is behind schedule. You had expected to have $9600 worth of work completed, that is your planned value (PV). However, you completed

$7700 (EV) worth of work. Your schedule variance is -$1900, SV=EV-PV. [PMBOK 5th Edition, Page 218]

35. Question

You are the Project Manager for Wicked Fast Cars, Corp. You are working on a project for the Human Resources department that is scheduled to take one

year. After three months into the project, you calculate the EV at $35,000 and the PV at $45,000. Which option below represents the value for the SV?

0.78

1.29

$10,000

-$10,000

Incorrect

SV = Earned Value (EV) Planned Value (PV) SV = $35,000-$45,000 SV = -$10,000. [PMBOK 5th edition, Page 218]

36. Question

Which of the below statement is true?


11/29



Actual Cost (AC): AC is the total cost incurred in accomplishing work on the schedule activity or WBS component during a g iven time period

Budget At Completion (BAC): The estimated total cost of the project when done

Determine Budget: Allocating the cost estimates to individual project components

A ll

Incorrect

Budget At Completion (BAC): The estimated total cost of the project when done. Actual Cost (AC): AC is the total cost incurred in accomplishing work on the

schedule activity or WBS component during a given time period. Determine Budget: Allocating the cost estimates to individual project components.

37. Question

Which of the following statements are NOT true considering the planned value, the earned value, the schedule variance and the cost variance of a project?

The cost variance is the difference between the earned value and the actual cost

The planned value is the budget authorized to the work to be performed

The schedule variance is the difference between the earned value and the planned value

The earned value is the value of work to be completed in terms of the approved b udget

Incorrect

Earned value is the value of the work already completed. This value is often expressed in terms of the approved budget assigned to the work completed.

The earned value is measured against the performance measurement baseline. [PMBOK 5th edition, Page 218]

38. Question

Which statement is true about Bottom-up estimating?

Estimating the cost o f individual work items and then rolling up the costs to arrive at a project total.

None of the above

Uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project.

Both of the above are true.

Incorrect

Estimating the cost o f individual work items and then rolling up the costs to arrive at a project total is more accurate.

39. Question

Which of the following statement is true about Schedule Variance?

Schedule Variance (SV): Any difference between the scheduled completion o f an activity and the actual completion of that activity

Schedule Variance (SV): Any difference between the sched uled completion of an activity and the actual completion of that activity

and a negative result means less work has been performed than was planned

A negative result means less work has been performed than was planned

None

Incorrect

Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. SV = EV PV


12/29



40. Question

You are the project manager of a project which is scheduled to last for 18 months. You have elected to rent a piece of equipment for the duration o f a

project, even though you will need the equipment only for 6 months. The costs of the equipment rental per month are $120. This is an example of ___________.

None

Parametric Costs

Fixed Costs

Variable Costs

Incorrect

This is an example of Fixed Costs because $120 per month is fixed.

41. Question

You are in the initiation phase of your project and believe the project can be completed for $100,000. However, you are an experienced project manager and

know that many things can happen between the initiation phase and the closure of the project. You have provided an estimate in the project charter of

$75,000 $175,000. This is an example of?

True Estimate

Narrow Estimate

Absolute Estimate

Rough Order of Magnitude Estimate

Incorrect

A ROM estimate is given in the beginning of a project and is defined as -25% to +75% of the estimated cost. [PMBOK 5th edition, Page 201]

42. Question

As a project manager, you periodically do project performance reviews to compare cost performance over time, schedule activities or work packages over-

running and under-running budget, milestones due, and milestones met. Which of the following is not a valid analytical technique?

Earned Value Performance

Trend Analysis

Variance Analysis

Interpersonal skills

Incorrect

Interpersonal skills is not a valid choice. The other three choices, namely Variance Analysis, Trend Analysis and Earned Value Performance, are analytical

techniques. [PMBOK 5th edition, Page 91, 92]

43. Question

Which of the following are inputs of Estimate Costs?

Risk Register

Human Resource Plan

A ll

Scope Baseline

Incorrect


13/29



Input of Estimate Costs: Scope Baseline, Human Resource Plan, Risk Register, Organizational process assets and Enterprise environmental factors.

44. Question

If You are the project manager for a Project. You are about to create the cost estimates for the project. Which of the following inputs will help you?

All of the above

Human Resource Plan

Risk Register

Scope Baseline

Incorrect

Input of Estimate Costs are: Scope Baseline, Human Resource Plan, Risk Register, Organizational process assets and Enterprise environmental factors.

45. Question

If you want to print more than 25000 workbooks, printing of workbooks may be go up to 50000 workbooks . For every 5000 workbooks created, the cost isreduced a percentage of the original printing cost. The workbook expense is an example of which one of the following?

Variable Costs

None

Fixed Costs

Parametric Costs

Incorrect

This is an example of Variable Costs.

46. Question

Which of the following is the output of Estimate Costs process?

Activity Cost Estimates

WBS

Project Scope Statement

Output of Cost Estimation is Activity Cost Estimates.

Incorrect

47. Question

20% of the work was completed in a project. At this stage the project manager determined that the budget at completion (BAC) was no longer viable and

developed a forecasted estimate at completion (EAC). What index can the project manager use to look at the calculated projection of cost performance that

must be achieved on the remaining work

Schedule Performance Index (SPI)

Cost Performance Index (CPI)

Cost Variance (CV)

To-Complete Performance Ind ex (TCPI)

Incorrect


14/29



The to-complete performance index (TCPI) is the calculated projection of cost performance that must be achieved on the remaining work to meet a

specified goal such as the BAC or EAC. I t is defined as the work remaining divided by the funds remaining. [PMBOK 5th edition, Page 221]

48. Question

How would you calculate your EAC if the ETC work will be performed at the budgeted rate?

EAC=(BAC-EV)*CPI

EAC = BAC/CPI

EAC= BAC-EV

EAC = AC + BAC - E V

Incorrect

If the remaining project work is expected to be performed at the budgeted rate, the formula for EAC is AC + (BAC EV). [PMBOK 5th edition, Page 220]

49. Question

Large variations in the periodic expenditure of funds are undesirable for organizational operations. Therefore the expenditure of funds is frequently

reconciled with the disbursement of funds for the project. According to the PMBOK, this is known as:

Disbursement reconciliation

Expenditure Reconciliation

Budget Reconciliation

Funding Limit Reconciliation

Incorrect

This is known as Funding Limit reconciliation. This will necessitate the scheduling o f work to be adjusted to smooth or regulate those expenditures.


50. Question

Which is the least accurate approach in estimating?

Rough Order of Magnitude

Budget Estimate

WBS Estimate

Definitive Estimate

Incorrect

The Rough Order of Magnitude is the least accurate approach; it may vary from -25 percent to +75 percent.

51. Question

In the earned value management technique, the cost performance baseline is referred to as:

Performance Base Value (PBV)

Performance Cost Baseline (PCB)

Cost Measurement Baseline (CMB)

Performance Measurement Baseline (PMB)


15/29



Incorrect

The cost performance baseline is an authorized time-phased budget at completion (BAC). It is used measure, monitor, and control overall cost

performance on the project. In the earned value management technique, it is referred to as the performance measurement baseline (PMB). [PMBOK 5th

edition, Page 218, 223]

52. Question

You are the project manager of the MKTG Project. The project has a budget of $200,000 and is expected to last for 2 years. The project is now 20 percent

complete and is on schedule. What is the BAC?

$200,000

$20,000

$50,000

$60,000

Incorrect

The BAC is the budget at completion (Total budgeted cost), which is $200,000.

53. Question

Which of the following are parts of Project Cost Management?

A ll

Estimate Costs

Determine Budget

Control Costs

Incorrect

Parts of Project Cost Management are: Plan Cost Management,Estimate Costs, Determine Budget and Control Costs.

54. Question

You are a project manager who is in charge of a technical documentation project. The project is 30% complete after 2 months and has cost $53,000. The

budget for the project is $90,000 and is scheduled to last 6 months. How is the project performing?

The project is ahead of schedule and under budget

The project is behind schedule and under budget.

The project is ahead of schedule and over budget.

The project is behind schedule and over budget.

Incorrect

CPI=EV/AC CPI=(90,000*30%)/53,000 CPI=27,000/53,000 CPI=0.51(over budget) SPI=EV/PV SPI=27,000/(90,0000.33) SPI=27,000/29,970 SPI=0.9 (behind

schedule). [PMBOK 5th edition, Page 219]

55. QuestionWhich of the following statement is true ?

Schedule Variance (SV): Any difference between the scheduled completion o f an activity and the actual completion of that activity

A ll


16/29



Cost Variance (CV): Any difference between the estimated cost of an activity and the actual cost of that activity.

Schedule Performance Index (SPI): The ratio of work performed to work scheduled

Incorrect

Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. Cost Variance (CV):

Any difference between the estimated cost of an activity and the actual cost o f that activity. Schedule Performance Index (SPI): The ratio of work performed

to work scheduled.

56. Question

Which of the following is the output of Determining Budget ?

A ll

Project Funding Requirements

Cost Performance Baseline

Project Document Updates

Incorrect

Outputs of Determine Budget: Cost Performance Baseline, Project Funding Requirements and Project Document updates.

57. Question

You are the project manager of an AC Installation Project for a new building. Your BAC is $500,000. You have spent $270,000 of your budget. You are now 50

percent done with the project, though your plan called for you to be 55 percent done with the work at this time. What is the CPI?

0.92

0.82

0.72

0.45

Incorrect

CPI = EV / AC Earned Value/ Actual Cost The EV of $250,000 is divided by the AC of $270,000 for a value of .92.

58. Question

Your project is mid-way through a delivery schedule. As the project manager, you want to determine how much work is still left. Which is the most accurate

way to determine the remaining work to be carried out by the project team?

Earned Value Technique

Rolling wave method

A Manual forecast

Future analysis

Incorrect

Although the Earned value technique of determining the balance work in the project is quick and automatic, it is not as valuable or accurate as the manual

forecasting of the remaining work by the project team. This however is more time-consuming. [PMBOK 5th edition, Page 220]

59. Question

You have two possible projects to manage, but you can only choose one. Project MKTG is worth $23,000, while Project SALESPTR is worth $25,000.


17/29



Management elects to choose Project SALESPTR. Which one of the following is the opportunity cost of this choice?

$27,000

$4000

$23,000

$50,000

Incorrect

The opportunity cost is the amount of the project that was not chosen.

60. Question

If you are influencing factors that create changes to the cost of the project, which process are you using?

Determine Budget

Estimate Costs

Negotiate Costs

Control Costs

Incorrect

Control Costs is the process of managing the projects costs and the changes that threaten the bottom line. [PMBOK 5th edition, Page 215]

61. Question

What is the BEST way to make an accurate forecasting of ETC?

EAC - AC

BAC EV

Manual forecasting of cost of the remaining work.

(BAC EV)/CPI

Incorrect

Manual forecasting of costs for remaining work is generally the best means of generating an accurate forecast. [PMBOK 5th edition, Page 220]

62. QuestionA project is estimated to cost $ 50,000 with a timeline of 50 days. After 25 days, the project manager finds that 50% of the project is complete and Actual costs

are $ 50,000. What is the Cost Performance Index (CPI) ?

The CPI is 2

The CPI is 1

The CPI is 1.5

The CPI is 0.5

Incorrect

The correct answer is 0.5. The Cost performance Index (CPI) is g iven by the formula CPI = EV/AC where EV is the Earned Value and AC is the Actual Cost.

Earned Value = 50% of $ 50,000 = $ 25,000 since 50% of the project is complete. Hence CPI = 25,000 / 50,000 = 0.5. [PMBOK 5th edition, Page 219]


18/29



63. Question

Which one of the following best describes analogous estimating?

Reserve analysis

Less accurate

Three-points estimates

Bottom up estimating

Incorrect

Analogous estimating is less accurate than other estimating methods.

64. Question

The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall cost performance of the project. It is

usually displayed in the form of:

An inverted S curve.

An S-curve

Pie-chart

A Z curve

Incorrect

The correct response is S curve. The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall

cost performance of the project. It is usually displayed in the form of: an S curve and is developed by summing estimated costs by period. [PMBOK 5th

edition, Page 213]

65. Question

Your project has a budget of $240,000 and is expected to last for 1 year, with the work and budget spread evenly across all months. The project is now in the

fourth month, but the actual work completed is 20% of the total work. What is Schedule Performance Index (SPI) in this case?

2.5

1.66

1.9

1

Incorrect

Schedule Performance Index (SPI) = Earn Value / Planned Value Earn Value = (Total Cost / total project months) * total months completed = ($240,000 / 12)

* 4 = $80,000 Planned Value = Total Cost *percentage actually completed = $240,000 * 20 / 100 = $48,000 SPI = $80,000 / $48,000 = 1.66

66. Question

Which of the following methods o f forecasting EAC and ETC is the most accurate?

ETC based on BAC

ETC based on CPI and SPI

ETC based on CPI

ETC based o n new estimate

Incorrect


19/29



The bottom-up ETC gives the most accurate results. [PMBOK 5th edition, Page 220]

67. Question

Your project has a budget of $10,000 and is expected to last for 1 year, with the work and budget spread evenly across all months. Right now CPI is 0.8. What

is Estimate at Completion (EAC) in this case?

2.5

$12,500

$10,000

3.0

Incorrect

Estimate at Completion (EAC) = BAC / CPI = $10,000 / .8 = $12,500

68. Question

Which of the following statement is true about Project Scope Statement?

It provides important information about project requirements that are considered during Estimating Costs

The pro ject scope statement describes the business need, justification, requirements, and current boundaries of the project.

A ll

Contains project justification and the project objectives, which need to be considered

Incorrect

Project Scope Statement: The project scope statement describes the business need, justification, requirements, and current boundaries for the project. It

provides important information about project requirements that are considered during Estimating Costs.

69. Question

ohn, a project manager, for Code Crashers Inc. has been assigned a project where he must lead a group of inexperienced programmers in developing a

software package that creates Material Safety Data Sheets (MSDS) for a chemical company. This is very similar to a project that his colleague, Peter, worked on

in 2006, with some junior programmers. If John needs to come up with a rough order of magnitude estimate, what tool or technique should he use?

Bottom Up Estimating


Analogou s Estimating

Three-point estimate

Incorrect

Analogous estimating is the correct choice. This technique relies on parameters from a similar previous project and is a gross value estimating approach. It

is also generally less accurate. [PMBOK 5th edition, Page 204]

70. Question

A project to construct 10 buildings in sequence, is estimated to cost $ 500,000 with a project timeline of 6 months. During a review after 3 months, the projectmanager finds that only 4 buildings are ready. The Actual Cost is $ 200,000. The Schedule Performance Index (SPI) of the project would then be:

1.25

0 .8


20/29



Cannot be determined since the data is insufficient

1

Incorrect

SPI = EV / PV. Earned Value = (4 / 10) * 500,000 = 200,000 since 4 buildings are completed out of 10. Planned Value = (5 / 10) * 500,000 = 250,000 since 5 of 10

buildings were expected to be completed. Hence SPI = 200,000 / 250,000 = 4 / 5 = 0.8 [PMBOK 5th Edition, Page 219]

71. Question

You are a Project Manager for Groceries R US, a supermarket chain, and are currently working on a project to build a new outlet. The planned values (PV) for

the foundation and the frame are $150,000 and $500,000. After five months, you do a performance measurement analysis. You are currently not ahead of

schedule. The actual costs for the foundation and frame were $175,000 and $650,000 up to this point where 100% of the foundation is complete and only

80% of the frame is complete. Which value represents the cost performance index (CPI) to two decimal places at this point in the project?

1.19

0.67

0.84

1.5

Incorrect

Get the total for the actual costs by adding the $175,000 and $650,000 for the foundation and frame. The total is $825,000. Now calculate earned value. We

need to identify all of the activities that have been completed or partially completed as of the measurement date. If partially completed, we calculate the

fractional value of the budgeted cost for the activity by the percent completion. Add together the budgeted cost for completed or partially completed work

activities, INCLUDING any work that has been performed ahead of schedule. We are told that we are not ahead of schedule. So there is nothing to include

for the ahead o f schedule category. 100% of the foundation is complete and only 80% of the frame is complete. So we add 100% of $150,000 and 80% of

500,000, which is $400,000, together to get a total earned value of $550,000. Now find the CPI by taking the total for EV $550,000 up to this point and

dividing it by the total of the actual cost $825,000 for the same time period. The result for CPI is 0.67. [PMBOK 5th edition, Page 219]

72. Question

Your project is running slightly over budget. You mention this to another project manager, who suggests you shift some of your expenses to indirect costs

that are not charged to your project budget. What do you do?

Examine project expenses to see if any are indirect expenses that could be taken off your project.

Reestimate the project.

Use your reserves.

Fast track the project.

Incorrect

You should use your project reserves to cover the budget overruns. Project managers are required to d isclose accurate and truthful information about

their projects. Masking an expense or otherwise using a half-truth to cover a budget overrun is a violation of the PMI Code. [Reference - PMBOK 5th

edition, page 206 & PMI Code o f Ethics and Professional Conduct, Page 2, 4, 5]

73. Question

You are a project manager of a project. Till today you have actually completed $34,000 of work and based on the cost plan it should have been $50,000. What

is Schedule Variance (SV) in this case?

-$16,000

$34,000

$23,000

$16,000


21/29



Incorrect

Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. SV = EV PV SV = $34,000

$50,000 = -$16,000

74. Question

A projects financial management reserve is identified in which process:

Determine Budget

Estimate Costs

Control Costs

Estimate Activity Resources

Incorrect

The Management Contingency Reserve is identified in the Determine Budget process. [PMBOK 5th edition, Page 213]

75. Question

The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall cost performance of the project. It is

usually displayed in the form of:

Pie-chart

An S-curve

A Z curve

An inverted S curve.

Incorrect

The correct response is S curve. The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall

cost performance of the project. It is usually displayed in the form of: an S curve and is developed by summing estimated costs by period. [PMBOK 5th

edition, Page 213

76. Question

The Actual Cost (AC) is the total cost actually incurred and recorded in accomplishing work performed for an activity or work breakdown structure

component. What is the upper limit for the AC?

The Actual Cost (AC) is limited to the Planned Value (PV).

50% over and above the Planned Value (PV)

100% over and above the Planned Value (PV)

There is no upper limit for the Actual Cost (AC)

Incorrect

There is no limit to the Actual Cost (AC). Whatever is spent to achieve the Earned Value (EV) is measured as the Actual Cost. [PMBOK 5th edition, Page 218]

77. Question

You are the project manager for Gleeson Associates. You are working together with a junior project manager on a project. You are currently discussing

performance measurement analysis with her. You explain to her exactly the different variables involved. You tell her all of the following statements are true

about the cost variance EXCEPT?


22/29



It is always a po sitive value

It is used to determine whether or not the project is meeting the planned costs

It is calculated by the following formula: Cost Variance = Earned Value - Actual Cost.

Its tendency is to decrease as the project is nearing the end.

Incorrect

The cost variance can be a negative value, zero, or a positive value depending on the earned value and actual costs. A negative cost variance indicates that

the actual cost of the work was more than the amount of work being completed. [PMBOK 5th edition, Page 218]

78. Question


fourth month, the work is on schedule, but you have already spent $120,000 of the project budget. What is your COST Variance in this case?

$240,000

$40,000

None

-$40,000

Incorrect

Cost Variance = Earn Value Actual Cost Earn Value = (Total Cost/total project months) * total months completed = ($240,000 / 12)*4=$80,000 CV = $80,000-

$120,000 = -$40,000

79. Question

You are the project manager of a Project. Your project will cost your organization $50,000 to complete over the next 3 months. Once the project is completed,

the deliverables will let the company earn $5000 per month. What is the time to recover the costs of the project?

2 Years

1 Year

10 Months

3 Years

Incorrect

This is calculated by d ividing the ROI of $5000 per month into the project cost. 50000/5000 = 10 months

80. Question

As part of EVM, a project manager is calculating the to-complete performance index (TCPI) based on EAC. The data that he has is: the budget at completion

for the project is $ 100,000. The earned value for the project is $ 25,000. The actual costs to date are 40,000 and the estimate at completion is $ 115,000. What

is the TCPI that he will obtain?

1

0.9

1.1

0

Incorrect

TCPI based on EAC = (BAC-EV)/(EAC-AC) = (100000 25000) / (115000 40000) = 75000/75000 = 1 [PMBOK 5th edition, Page 221]


23/29



81. Question

Your company has been hired to configure software at 500 workstations. All workstations need equal time to configure. The contract for the project is set at a

fixed cost, and the incentive based on how fast the project work is going to be completed. Management has requested that you study the work method to

determine a faster, less costly, and a better method to complete the project. This scenario is an example of _________.

Time Constraint

Schedule Constraint

Learning Curve

Value Analysis

Incorrect

Value Analysis is a systematic approach to find less costly ways to complete the same work. A and B are incorrect, as this situation does not describe a

specific time or cost constraint. D is incorrect: the learning curve happens as the project team completes the work.

82. Question

Given the following estimates: Optimistic 3 days, Pessimistic 9 days, and most likely 6 days. What is the PERT weighted average?

6.3

4

6.1

6

Incorrect

Optimistic = tO, most likely = tM, Pessimistic = tP. PERT weighted average = (tO + 4*tM + tP)/6 = (3+4*6+9)/6 = 36/6 = 6

83. Question


fourth month, but till now total spending for this project is $5,000. What is Variance at Completion in this case?

$13,000

-$5,000

$12,000

-$3,000

Incorrect

Earn Value = (Total Cost / total project months) * total months completed = ($12,000 / 12) * 4 = $4,000 Variance at Completion = BAC EAC CPI = EV (Earned

Value) / AC (Actual Cost) = $4000/$5000 = .8 Estimate at Completion (EAC) = BAC/CPI = $12,000 / .8 = $1500 Variance at Completion = $12,000 $15,000 = -

$3,000

84. Question

A project manager is analyzing the relationship between the consumption of project funds and the physical work being accomplished for such expenditures.

In which pro ject management process would this be done?

Determine Budget

Control Costs

Estimate Costs


24/29



Manage Costs

Incorrect

Control Costs is the process o f monitoring the status of a project to update the project budget and managing changes to the cost baseline. Much of the

effort of cost control involves analyzing the relationship between the consumption of project funds to the physical work being accomplished for such

expenditures. [PMBOK 5th edition, Page 215]

85. QuestionYou are working for FALCON highway construction agency as a project cost estimator. The agency started a highway construction project which is in its

planning phase. The rough order of magnitude (ROM) cost estimate for the project is expected to be between 3 and 5 million dollars in the planning phase

with a ROM of -25% to +25%. What will be the ROM estimate in the execution phase if it changes to -10% to +10%?

Between 3.6 and 4.4 million dollars




Incorrect

Since the Rough Order o f Magnitude (ROM) in the planning phase is -25% to +25%, the estimated mean value is 4 million dollars. If the estimates narrows

down to -10% to +10% it becomes 3.6 to 4.4 million dollars. [PMBOK 5th edition, Page 201]

86. Question

Which estimating technique is most accurate?

Analogous estimating

Parametric modelling

Bo ttom-up estimating

None of the above

Incorrect

Bottom-up estimating: Estimating the cost of individual work items and then rolling up the costs to arrive at a project total is more accurate.

87. Question

Variance thresholds for monitoring cost performance are typically expressed as _______________ from the baseline plan.

Negative deviation

Positive deviation

Percentage deviation

Average deviation

Incorrect

Variance thresholds for monitoring cost performance are usually expressed as percentage deviations from the baseline plan. [PMBOK 5th Edition, Page

199]

88. Question

A variance threshold for costs or other indicators to indicate the agreed amount of variation allowed is called:


25/29



Upper control limits

Control thresholds

Upper specification limit

Cost overrun

Incorrect

Control thresholds are variance thresholds for costs or other indicators such as person days and indicate the agreed amount of variation allowed.


89. Question

Contingency Reserves are estimated costs to be used at the discretion of the project manager to deal with:

Anticipated but not certain events.

Anticipated and certain events

Scope creep

Unanticipated events

Incorrect

Contingency Reserves are estimated costs to be used at the discretion o f the project manager to deal with anticipated, but not certain events. These are

also called as Known unknowns. [PMBOK 5th edition, Page 206]

90. Question

You are the project manager for a project. The customer has requested that you factor in after-project costs, such as maintenance and service. This is an

example of which one of the following?

Project Spin off

Life Cycle costs

Scope Creep

Operations

Incorrect

The after-project costs are known as Life Cycle costs.

91. Question

You are the Project Manager for JTs Lumber Yard. You are trying to forecast estimates for the last phase of the project you are currently working on. Based

on the performance of the project to date, which formula can be used to estimate the total value of the project when completed assuming similar variances

will not occur?

SV = EV - PV

ETC = (BAC - EV)/CPI

CPI = EV/AC

EAC = AC + BAC - E V

Incorrect

The formula EAC = AC + BAC EV is used to determine the total value of the project when completed assuming similar variances will not occur for the

uncompleted project activities. [PMBOK 5th edition, Page 220]


26/29



92. Question

Analogous Cost Estimating is which of the following?

Bottom-up estimating

Generally accurate

Generally less accurate

Uses statistical relationship between historical data and other variables

Incorrect

Analogous cost estimating is generally deemed less accurate than other methods of estimation. [PMBOK 5th edition, Page 204]

93. Question

Lucy is currently preparing a high-level cost estimate for her project in the initiation phase. Given the limited detail available to her, what would you expect

the range of her estimate to be and what would you call such an estimate?


-5 to +10 %, Narrow

-1 to +1 %, Definitive


Incorrect

During the initial stages of the project, the level of information available will be limited. Hence the Rough Order of Magnitude (ROM) estimate is usually

prepared and has an accuracy range of -25% to +75%. [PMBOK 5th edition, Page 201]

94. Question

Your company has been hired to configure software at 500 workstations. All workstations need equal time to configure. You calculate the time to configure

each workstation as 5 hours. The cost for labor is calculated at $500 for each workstation. Your Project Sponsor disagrees with your labor estimate. Why is it

so?

You have not factored in all of the effort applied to the work.

You have not considered the law of diminishing returns.

You haven't completed one workstation yet, so you don't know how long the work will actually take

You have not considered the learning curve.

Incorrect

As the project team completes more and more units, the time to configure a workstation should take less and less time.

95. Question

Which of the following statement is true about Control Costs ?

Monitoring cost performance to detect variances from the plan

Recording all appropriate changes accurately against the cost baseline

Influencing the factors that create changes to the cost baseline

A ll


27/29



Incorrect

96. Question

Given the following estimates: Optimistic 3 days, Pessimistic 9 days, and most likely 6 days. What is the Triangular Distribution (tE) ?

6.3

4

6.1

6

Incorrect

Optimistic = tO, most likely = tM, Pessimistic = tP. Triangular Distribution = (tO + tM + tP)/3 = (3+6+9)/3 = 18/3 = 6

97. Question

Your Vice President has asked you what the Estimate at Completion is go ing to be for a small project you are working on. You were g iven a budget of $30,000,

and to date you have spent $20,000 but only completed $10,000 worth of work. You are sure that the future work will be accomplished at the planned rate.

$40,000

$60,000

$30,000

$10,000

Incorrect

If the future work will be accomplished at the planned rate, then then Estimate at Completion (EAC) will be AC+BAC-EV. Budget at Completion (BAC) is

$30,000, Earned Value (EV) is $10,000 and Actual Cost (AC) is $20,000. Hence the EAC is $40,000. [PMBOK 5th edition, Page 224]

98. Question

You are a project manager of a project. Till today you have actually completed $34,000 of work, but based on the cost plan it should have been $50,000. What

is percentage Schedule Variance (SV) in this case?

-16%

28%

-32%

32%

Incorrect

Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. SV % = (EV PV) / PV SV %

= ($34,000 $50,000) / $50,000 = -32%

99. Question

You are aware that cost and schedule risks are prevalent in your project. You want to compare the planned project performance with its actual performance.

What should you perform to provide this information?

Reserve analysis

Variance and trend analysis

Risk audit


28/29



Risk reassessment

Incorrect

Variance and trend analysis are used to evaluate the differentials between planned and actual costs, schedules, and performance criteria. A variety of

statistical techniques, such as Earned Value (EV) technique, are used to analyze these variances. [PMBOK 5th edition, Page 222]

100. Question


fourth month, the work is on schedule, but you have spent $120,000 of the project budget. What is your COST Variance percentage in this case?

40%

-50%

50%

None

Incorrect

Cost Variance = Earn Value Actual Cost Earn Value = (Total Cost/total project months) * total months completed = ($240,000 / 12) * 4 = $80,000 CV =

$80,000 $120,000 = -$40,000 CV % = CV / EV = -$40,000/$80,000 = -50%

101. Question

Martin is the project manager of a project that is in an early phase. He needs to estimate costs but finds that he has a limited amount of detailed information

about the project. Which of the following estimation techniques would be least suited to his requirements?

Top-down Estimating


Budgetary Estimating


Incorrect

Bottom-up estimating is a technique that can be applied only when there is a sufficient amount of detail available to the project manager. [PMBOK 5th

edition, Page 205]

102. Question

A project manager is estimating project costs and needs to decide whether the estimates will include only direct costs, or whether the estimates will also

include indirect costs. In which of the following phases does this decision need to take place?

Determine Budget

Estimate Costs

Define Scope

Plan Expenses

Incorrect

This is done in the Estimate Costs process. The pro ject manager works in accordance with the organizations guidelines and decides whether the estimates

will be limited to direct project costs only or whether the estimates will also include indirect costs. Indirect costs are those that cannot be traced to one

specific project, and are usually allocated equitably over multiple projects. [PMBOK 5th edition, Page 202]

103. Question


29/29


RETURN TO TOP OF PAGE COPYRIGHT 2014 LOG OUT

Which of the following statement is true about Work Breakdown Structure (WBS)?

It is used to organize the cost estimates and to ensure that the cost of all identified work has been estimated.

It identifies the project elements that require resources.

A ll

It provides the relationship among all the components of the project and the project deliverable.

Incorrect

Work breakdown structure (WBS): It identifies the project elements that require resources, used to organize the cost estimates and to ensure that the cost

of all identified work has been estimated, and provides the relationship among all the components o f the project and the project deliverable.

104. Question

You have elected to use parametric modelling while Estimating Costs for the project. Which one of the following is an example of parametric modelling?

Historical information from a similar project

Estimates based on top-down budgeting

Estimates built from bottom-up based on the WBS

$10 per pound

Incorrect

$10 per pound is an example of parametric modelling. Parametric modelling: Using project characteristics (or parameters) in a mathematical model to

predict costs (e.g., price per square foot). B is incorrect, as historical information is analogous, not parametric. C is incorrect; bottom-up estimating is not a

parametric modelling. D is incorrect, top-down budgeting is related to analogous estimating .

105. Question

The Budget at Completion (BAC) for a project is $50,000. The Actual Costs (AC) to date are $10,000. The Earned Value (EV) is $7,000. At this stage, the project

management team did a manual bottom-up summation of costs and forecast an Estimate to Complete (ETC) of $50,000. What is the Estimate at Completion

(EAC) for the project?

$57,000

$40,000

$60,000

$53,000

Incorrect

When a bottom-up manual forecasting has been done for the ETC, the calculation for EAC is g iven by: EAC = AC + bottom-up ETC Hence, EAC = 10,000 +

50,000 = $60,000. Note that the BAC is no longer viable at this stage. [PMBOK 5th edition, Page 220]
http://www.pmpden.com/wp-login.php?action=logout&_wpnonce=261e5bf05d

Project Cost Management Questions

Documents

Transcript of Project Cost Management Questions