Project Cost Management
The project manager has identified an Estimate at Completion (EAC) of $2,000, an Actual Cost (AC) of $500, and a Schedule Performance Index (SPI) of 75 percent. What is the project's Estimate to Complete (ETC)?
$1,500
As the project manager, you need to decide if you should buy or lease a server for the software implementation. The monthly lease cost is $1,500. To purchase the server, the initial investment is $45,000 and the monthly service fee is $250. How many months will it take for the monthly lease cost to equal the purchase cost?
$1,500M = $45,000 + $250M $1,500M - $250M = $45,000 $1,250M = $45,000 M = $45,000/$1,250 M = 36
What range is used by a project manager for a definitive estimate?
-5 to +10% from actual
outputs for determine budget
-cost baseline -project funding requirements -project documents updates
outputs for estimate costs
-cost estimates -basis of estimates -project documents updates
tools and techniques for estimate costs
-expert judgement -analogous estimating -parametric estimating -bottom-up estimating -three-point estimating -data analysis -project management information system -decision making
tools and techniques for determine budget
-expert judgement -cost aggregation -data analysis -historical information review -funding limit reconciliation -financing
tools and techniques for plan cost management
-expert judgement -data analysis -meetings
tools and techniques for control costs
-expert judgement -data analysis -to-complete performance index -project management information system
inputs for plan cost management
-project charter -project management plan -EEFs -OPAs
inputs for estimate costs
-project management plan -project documents -EEFs -OPAs
inputs for determine budget
-project management plan -project documents -business documents -agreements -EEFs -OPAs
inputs for control costs
-project management plan -project documents -project funding requirements -work performance data -OPAs
outputs for control costs
-work performance information -cost forecasts -change requests -project management plan updates -project documents updates
The project manager started the project with a BAC of $5,000. The project currently has an EV of $2,000 and an AC of $1,000. What is the TCPI for the project?
0.75
4 processes:
1) Plan cost management 2) Estimate costs 3) Determine budget 4) Control costs
If Earned Value (EV) is $500, Actual Cost (AC) is $400, and Budget to Completion (BAC) is $1,000, what is the Variance at Completion (VAC) assuming that future work will be accomplished at the planned rate?
100
At this moment, a project's costs amount to $250 for the work that has been completed. Which of the following terms does this statement best describe?
AC
The project manager set a budget of $5,000 to complete the total project. Which of the following terms does this statement best describe?
BAC
The sum of all budgets established for the work to be performed is known as which of the following?
BAC
Which of the following would be used to determine the worth of work you are getting out of every dollar that is spent on a project?
CPI
The project manager is reviewing the current earned value report, which shows the following: -Schedule Performance Index (SPI) = 1.2 -Cost Performance Index (CPI) = 1.6 -Planned Value (PV) = $200,000 -Schedule Variance (SV) = $40,000 What is the project's Cost Variance (CV)?
Correct answer: $90,000 The project's Cost Variance (CV) is $90,000. The CV formula is CV = EV - AC Neither Earned Value (EV) nor Actual Cost (AC) is provided in the question; therefore, you must solve the question by working backward to the answer. 1. Find the EV: You can find Earned Value (EV) using the Schedule Variance (SV) formula: SV = EV - PV $40,000 = EV - $200,000 $40,000 + $200,000 = EV EV = $240,000 2. Find the AC: You can find AC using the CPI formula: CPI = EV / AC 1.6 = 240,000 / AC 1.6 x AC = $240,000 AC = $240,000 / 1.6 AC = $150,000 3. Find the Cost Variance (CV): CV = EV - AC CV = $240,000 - $150,000 CV = $90,000
The project manager stated that he expected the total project to cost $4,500. Which of the following terms does this statement best describe?
EAC
AC + BAC - EV is the formula used to find:
EAC (if future work will be accomplished at the planned rate)
At this moment, the project has cost $4,000, and the project manager expects it to cost an additional $2,000 to finish. Which of the following terms does this statement best describe?
ETC
The expected cost to finish all remaining project work is known as:
ETC
Up to this moment, a project has cost $4,000, and the project manager expects it to cost an additional $2,000 by the time it's finished. Which of the following terms does this statement best describe?
ETC
Which of the following would be used to calculate the expected cost to finish all remaining project work?
ETC
Which of the following represents the Cost Variance (CV) formula?
EV-AC
Which of the following formulas is used to calculate Schedule Variance (SV)?
EV-PV
During the initiating process, the project manager was creating estimates, but he did not know the exact details of the project at the time. What type of estimate and range was the project manager using to create his estimates?
ROM estimate with a range of -25 to +75% from actual
The project manager uses the formula EV / PV to analyze the project's actual progression rate against its planned progression rate. What is the term used for the result that the project manager is finding?
SPI
What calculation would you use if you wanted to know the efficiency that must be maintained on your project in order to complete the plan?
TCPI
Which earned value (EV) analysis technique measures the cost of completing the remaining work against the remaining budget?
TCPI
At this moment, the project manager expects the project to be $500 over budget by the end. Which of the following terms does this statement best describe?
VAC
Which of the following best describes a project's cost baseline?
a cost baseline is an approved time-phased budget that will be used to measure and monitor cost performance
Which of the following best describes net present value (NPV)?
a method used to analyze the profitability of a project
What type of estimate is being figured when a project manager uses a range of -10 to +25 percent from actual?
budget estimate
What is added in the aggregation process to achieve the cost baseline?
contingency reserves
What process within the Project Cost Management knowledge area is responsible for monitoring the project in order to update project costs and for managing changes to the cost baseline?
control costs
The project budget is best described as which of the following?
cost baseline plus the management reserves
Which of the following best describes a characteristic of cost baselines in projects performed in agile environments?
cost baselines do not exist
Work on a project is being done in multiple locations in three countries. The project team needs to know in which currency they should report their cost figures. Which of the following would contain that information?
cost management plan
outputs for plan cost management
cost management plan
Which of the following is not an important aspect of a project's cost control variance analysis?
determining whether the base budget is adequate for the project
At this moment, there is approximately $500 worth of work actually completed on a project. Which of the following terms does this statement best describe?
earned value
Which data analysis technique compares the performance baseline to the actual schedule and cost performance?
earned value analysis
Which report should the project manager review when needing to assess the project's performance based on its scope, cost, and schedule measures?
earned value report
Controlling project costs consists of all except which of the following?
ensuring cost overruns are well explained
Which report should the project manager look for when needing to review the project's future status and performance?
forecasting report
Which of the following is true in regard to the interpretation of a To Complete Performance Index (TCPI)?
greater than 1 = harder to complete
Company X is considering four different projects. Project A has an NPV of $45,000, an IRR of 10%, a payback period of 18 months, and a benefit-cost ratio of 2.25. Project B has an NPV of $75,000, an IRR of 12%, a payback period of 12 months, and a benefit-cost ratio of 0.75. Project C has an NPV of $20,000, an IRR of 8%, a payback period of 8 months, and a benefit-cost ratio of 1.95. Project D has an NPV of $70,000, an IRR of 13%, a payback period of 10 months, and a benefit-cost ratio of 1.0. Which project should Company X choose if they are basing their decision on IRR?
project D
Which of the following should not be used for cost estimate documentation?
project charter
What tool or technique could a project manager use to monitor the status of contingency and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested?
reserve analysis
Which of the following is best described as a review of a project's financial resources to compare the current balance against the projected amount needed?
reserve analysis
Which of the following is not a dimension used to conduct an earned value analysis (EVA)?
reserve analysis
Company X has a project with a benefit-cost ratio (BCR) of 1.5. What does that mean?
the benefit is 1.5 times the cost
If the benefit cost ratio is 1, it means:
the costs and benefits are the same
Company X has a project with a benefit-cost ratio (BCR) of 0.6. What does that mean?
the costs are greater than the benefits
Which of the following best describes Planned Value (PV)?
the current estimated value of the work planned to be done
Which of the following best describes "payback period"?
the length of time required to recoup the cost of a project
The project manager calculates the VAC and gets a result of -$5,523. What does this tell him?
the project is currently expected to be over budget when completed
The project manager calculates the CPI and finds that the result is .76. What does this tell him?
the project is getting back about 76 cents out of every dollar that is put into it
The project manager calculates the Schedule Performance Index (SPI) and finds that the result is 0.65. What does this tell the project manager?
the project is only progressing at 65% of the planned rate
Internal rate of return (IRR) is best described as:
the rate of growth a project is expected to generate
Present value is best described as:
the value today of future cash flows
What is the purpose of calculating the net present value (NPV) of each possible project?
to compare projects in order to select the best project to initiate
Which analysis technique should be used to decide if project performance is deteriorating over time?
trend analysis
A project with a CPI value calculated to be 1.12 tells the project manager the project is:
under planned costs
The project manager is calculating the costs of the wages and supplies for his project estimate. These costs are considered:
variable costs
Which report should the project manager review when needing to compare the project's actual results to its baselines?
variance report
Which of the following is the best example of when you would use Control Costs to identify the need to recommend corrective action?
when comparing the project's performance against it's performance measurement baseline
You are working on a project that is planned to take six months and has a total cost of $100,000. You would like to know the cost efficiency of the project. Your project's earned value is $80,000. What does the CPI indicate about your project?
your project is over it's planned budget
