Project Cost Management Set
12. When you review cost performance data on your project, different responses will be required depending on the degree of variance or control thresholds from the baseline. For example, a variance of 10 percent might not require immediate action, whereas a variance of 100 percent will require investigation. A description of how you plan to manage cost variances should be included in the— a. Cost management plan b. Change management plan c. Performance measurement plan d. Variance management plan
a. Cost management plan - The management of costs focuses on control thresholds or variance thresholds.
4. What is the EAC for this project, and what does it represent? (see pg 82) a. $12,500; the revised estimate for total project cost (based on performance thus far) b. $10,000; the revised estimate for total project cost (based on performance thus far) c. $12,500; the original project budget d. $10,000; the original project budget
a. $12,500; the revised estimate for total project cost (based on performance thus far) - Estimate at Completion (EAC) = Budget at Completion (BAC) / Cost Performance Index (CPI).
19. You have set aside a certain portion of your project for contingency and management reserves. You want to use these reserves to cover the costs of risk responses or other contingencies. On your project, you have had some opportunities that resulted, which means you should— a. Add these opportunities to your reserves for later risk responses b. Use value analysis c. Remove them from the contingency fund but maintain the management reserves d. Use value engineering
a. Add these opportunities to your reserves for later risk responses - Reserves are your safety net to handle risks, opportunities can be used to refill this bucket.
36. Assume that the project cost estimates have been prepared for each activity and the basis of these estimates has been determined. Now, as the project manager for your nutrition awareness program in your hospital, you are preparing your budget. Because you have estimates for more than 1,200 separate activities, you have decided to first— a. Aggregate these estimates by work packages b. Aggregate these estimates by control accounts to facilitate the use of earned value management c. Use the results of previous projects to predict total costs d. Set your cost performance baseline
a. Aggregate these estimates by work packages - Cost estimates for the activities should be aggregated by the work packages in the WBS.
37. Assume you are using earned value on your project, and as of today, your cumulative CPI is below the baseline. This means— a. All future work will need to be performed immediately with the range of the TCPI. b. The ETC work will be performed at an efficiency rate that considers both the schedule and performance indices. c. What the project has experienced to date is expected to continue. d. The budget should be rebaselined.
a. All future work will need to be performed immediately with the range of the TCPI. - The TCPI is a measure of cost performance that is required to be achieved with the remaining resources to meet a specified management goal. Ratio of Cost to Finish/Remaining Budget
30. Overall cost estimates must be allocated to individual activities to establish the cost performance baseline. In an ideal situation, a project manager would prefer to prepare estimates— a. Before the budget is complete b. After the budget is approved by management c. Using a parametric estimating technique and model specific for that project type d. Using a bottom-up estimating technique
a. Before the budget is complete - Any estimated project costs should be identified before the budget is approved from management.
20. There are many useful EVM metrics, but the most critical is— a. CPI b. EAC c. TCPI d. VAC
a. CPI - Measures the cost efficiency of budgeted resources and is considered to be the most critical earned value measurement metric and measures the cost efficiency for the work completed.
34. A revised cost baseline may be required in cost control when— a. CVs are severe, and a realistic measure of performance is needed b. Updated cost estimates are prepared and distributed to stakeholders c. Corrective action must be taken to bring expected future performance in line with the project plan d. EAC shows that additional funds are needed to complete the project even if a scope change is not needed
a. CVs are severe, and a realistic measure of performance is needed - Changes to the cost baseline are incorporated in response to approved changes in scope, activity resources or cost estimates.
24. There are a number of different earned value management rules of performance measurement that can be established as part of the cost management plan. One of them is the— a. Control account b. Formulas to determine the ETC c. Risk thresholds d. Activity attributes
a. Control account - Rules of earned value performance measurement: (1) Defines the points on the WBS where measurement of control accounts will be performed, (2) establish the EV measurement techniques, (3) state specific tracking methods and EV equations for calculating the EAC forecasts to provide a validity check on the bottom-up EAC.
25. Which of the following calculations CANNOT be used to determine EAC? a. EAC = ETC − AC b. EAC = BAC/CPI c. EAC = AC + (BAC − EV) d. EAC = AC + (BAC − EV)/(CPI × SPI)
a. EAC = ETC - AC - Incorrect formula
26. Typically, the statement "no one likes to estimate, because they know their estimate will be proven incorrect" is true. However, you have been given the challenge of estimating the costs for your nuclear reactor project. You are considering a variety of items as you incorporate the cost of financing, which is in the— a. Schedule b. Financial management plan c. The amount of indirect costs d. The benefit delivery plan
a. Schedule - Includes the type, quantity, and amount of time the team and physical resources will be used on the project.
5. You have now prepared your cost management plan so now you are preparing your project's cost estimate. You decided to use analogous estimating. Analogous estimating— a. Supports top-down estimating b. Calculates costs based on project parameters c. Produces higher levels of accuracy d. Indicates a range of estimates
a. Supports top-down estimating - The analogous technique relies on experience and knowledge gained to predict future events. It provides planners with an idea of costs generally not within +/-10%. Less costly and time consuming but less acurate.
29. Assume you are holding performance review meetings on your project to assess schedule activity and work packages over-running or under-running the budget and to determine any estimated funds needed to complete work in progress. You also are using earned value. You are preparing reports for your stakeholders as they want regular cost forecasts. This means they are interested in— a. The Estimate at Completion b. CPI and SPI c. To Complete Performance Index d. Variance analysis
a. The Estimate at Completion - The EAC is prepared as the project progresses to see if it is different from the budget at completion based on project performance.
2. What is the CPI for this project, and what does it tell us about cost performance thus far? (see pg 81) a. 0.20; actual costs are exactly as planned b. 0.80; actual costs have exceeded planned costs c. 0.80; actual costs are less than planned costs d. 1.25; actual costs have exceeded planned costs
b. 0.80; actual costs have exceeded planned costs - The Cost Performance Index (CPI) is a method for calculating the cost efficiency and financial effectiveness of a specific project through the following formula: CPI = earned value (EV) / actual cost (AC). A CPI ratio with a value higher than 1 indicates that a project is performing well budget-wise.
6. While cost estimates are the main output of the Estimate Costs process, not to be overlooked is— a. Updates to the cost management plan b. Assumptions log c. Updates to the project schedule d. Cost baseline
b. Assumptions log - The Estimate Costs process updates 3 documents: assumptions log, lessons learned register and risk register.
39. Assume that your actual costs are $800; your planned value is $1,200; and your earned value is $1,000. Based on these data, what can be determined regarding your schedule variance? a. At +$200, the situation is favorable as physical progress is being accomplished ahead of your plan. b. At -$200, the physical progress is being accomplished at a slower rate than is planned, indicating an unfavorable situation. c. At +$400, the situation is favorable as physical progress is being accomplished at a lower cost than was forecasted. d. At -$200, you have a behind-schedule condition, and your critical path has slipped.
b. At -$200, the physical progress is being accomplished at a slower rate than is planned, indicating an unfavorable situation. - Variance = EV-PV
10. Management has grown weary of the many surprises, mostly negative, that occur on your projects. In an effort to provide stakeholders with an effective performance metric, you will use the to-complete performance index (TCPI). Its purpose is to— a. Determine the schedule and cost performance needed to complete the remaining work within management's financial goal for the project b. Determine the cost performance needed to complete the remaining resources to meet management's financial goal c. Predict final project costs d. Predict final project schedule and costs
b. Determine the cost performance needed to complete the remaining resources to meet management's financial goal - The TCPI takes the value of work remaining and divides it by the value of funds remaining to obtain the cost performance factor needed t complete the remaining work. TCPI=(BAC-EV)/(BAC-AC).
33. Increased attention to return on investment (ROI) now requires you to re-estimate the costs for your project. When you looked at how costs were first estimated, you realized an order-of-magnitude estimate was prepared, which was never refined. Therefore, now you are estimating costs from the beginning. As you are preparing a new smart TV along with an automated home as the products of your project, you realize market conditions should be reviewed because— a. A competitor may be working on the same product b. Global supply and demand conditions can influence resource costs c. Resource cost data are available in your company's knowledge transfer system d. Expert judgment can assist in determining when costs exceed profit
b. Global supply and demand conditions can influence resource costs - The costs of material and resource products can shift between the ROM and the new budget review.
18. Your approved cost baseline has changed because of a major scope change on your project. Your next step should be to— a. Estimate the magnitude of the scope change b. Issue a change request c. Document lessons learned d. Execute the approved scope change
b. Issue a change request - A change request must be issued before a change to the cost baseline is prepared.
27. By reviewing cumulative cost curves, the project manager can monitor— a. EAC b. PV, EV, and AC c. CVs and SVs d. CPI and SPI
b. PV, EV, and AC - Cumulative cost curves (S-Curves) enable the PM to monitor the 3 parameters of planned value, earned value, and actual cost.
22. It is expensive to lease office space in cities around the world. Office space can cost approximately USD $150 per square foot in Tampa, Florida. And it can cost approximately ¥50,000 per square meter in Tokyo. These "averages" can help a person to determine how much it will cost to lease office space in these cities based on the amount of space leased. These estimates are examples of— a. Variance analysis b. Parametric estimating c. Bottom-up estimating d. Reserve analysis
b. Parametric estimating - Uses statistical relationships between historical data and other variables to calculate a cost estimate for project work.
21. The approved, integrated scope-schedule-cost plan for project work is— a. Project budget baseline b. Performance measurement baseline c. Level-of-effort control accounts d. Expressed in the To Complete Performance Index
b. Performance measurement baseline - The approved plan for the project work that integrates scope, schedule and cost parameters.
8. If the cost variance is the same as the schedule variance and both numbers are greater than zero, then— a. The cost variance is due to the schedule variance b. The variance is favorable to the project c. The schedule variance can be easily corrected d. Labor rates have escalated since the project began
b. The variance is favorable to the project - A positive schedule variance indicates that the project is ahead of schedule. A positive cost variance indicates that the project has incurred less cost than estimated for the work accomplished.
14. On your project, you need to assign costs to the time period in which they are incurred. To do this, you should— a. Identify the project components so that costs can be allocated b. Use the project schedule as an input to determine the budget c. Prepare a detailed and accurate cost estimate d. Prepare a cost performance plan
b. Use the project schedule as an input to determine the budget - The information from a schedule can be used to aggregate costs to the calendar period for which the costs will be incurred.
11. If operations on a work package were estimated to cost $1,500 and finish today but, instead, have cost $1,350 and are only two-thirds complete, the cost variance is— a. $150 b. -$150 c. -$350 d. -$500
c. -$350 - Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC): 1500(2/3)-1350=-350
9. You are responsible for preparing a cost estimate for a large World Bank project. You decide to prepare a bottom-up estimate because your estimate needs to be as accurate as possible. Your first step is to— a. Locate a computerized tool to assist in the process b. Use the cost estimate from a previous project to help you prepare this estimate c. Identify and estimate the cost for each work package or activity d. Consult with subject matter experts and use their suggestions as the basis for your estimate
c. Identify and estimate the cost for each work package or activity - Bottom-Up estimating evaluates the cost of individual work packages/tasks to the greatest level of detail. All of the costs then get rolled up together.
17. You receive a frantic phone call from your vice president who says she is going to meet with a prospective client in 15 minutes to discuss a large and complex project. She asks you how much the project will cost. You quickly think of some similar past projects, factor in a few unknowns, and give her a number. You provided which of the following type of estimate— a. Definitive b. Budget c. Rough-order-of-magnitude d. Detailed
c. Rough-order-of-magnitude - A ROM has an accuracy range of -25% to 75% and is made without detailed data.
31. One way to engage team members to improve estimate accuracy is to— a. Hold a focus group b. Use vendor bid analysis c. Use decision making d. Use a Delphi technique
c. Use decision making - Voting is used as an assessment process with multiple alternatives with an expected outcome in the form of future actions.
1. According to earned value analysis, the SV and status of the project described above is— (see pg 81) a. -$300; the project is ahead of schedule b. +$8,000; the project is on schedule c. +$200; the project is ahead of schedule d. -$200; the project is behind schedule
d. -$200; the project is behind schedule - Schedule Variance (SV) = Earned Value (EV) - Planned Value (PV): SV=2000-2200=-200
3. The CV for this project is— (see pg 82) a. 300 b. -$300 c. 500 d. -$500
d. -$500 - The cost variance is defined as the difference between earned value and actual costs. (CV = EV - AC).
15. You have a number of costs to track and manage because your project is technically very complex. They include direct costs and indirect (overhead) costs. You have found that managing overhead costs is particularly difficult because they— a. Are handled on a project-by-project basis b. Represent only direct labor costs c. Represent only equipment and materials needed for the project d. Can be included in the activities or at higher levels
d. Can be included in the activities or at higher levels - The amount of overhead to be added to the project is frequently decided by the performing organization and may be beyond the control of the project manager.
38. Assume it has become obvious on your project that the budget at completion is no longer viable. This means as the project manager, you should— a. Recommend to your managers that the project be terminated b. Perform an analysis of the remaining tasks on the critical path and take corrective or preventive action as required c. Determine the relationship of physical performance to costs spent to show performance for a specified time period for trend analysis d. Consider the forecasted EAC
d. Consider the forecasted EAC - Makes projections of conditions and events in the future based on current performance information and other info. EACs are based on actual costs for work completed and an estimate of the remaining work.
23. Your project manager has requested that you provide him with a forecast of project costs for the next 12 months. He needs this information to determine if the budget should be increased or decreased on this major construction project. In addition to the usual information sources, which of the following should you also consider? a. Cost estimates from similar projects b. WBS c. Project schedule d. Costs that have been authorized and incurred
d. Costs that have been authorized and incurred - Knowledge about the actual costs spent to date is required, and any changes that are approved.
35. As project manager, you identified a number of acceptable tolerances as part of your earned value management system. During execution, some "unacceptable" variances occurred. After each "unacceptable" variance occurred, a best practice is to— a. Update the budget b. Prepare a revised cost estimate c. Adjust the project plan d. Document lessons learned
d. Document lessons learned - The reasons for the variance, the rationale supporting the corrective action, and other related information must be documented.
16. If you want to calculate the ETC based on the assumption that work is proceeding as planned, the remaining work can be calculated by which of the following formulas? a. ETC = BAC - EV b. ETC = (BAC - EV)/CPI c. ETC = AC + EAC d. ETC = EAC - AC
d. ETC = EAC − AC
7. You must consider direct costs, indirect costs, overhead costs, and general and administrative costs during cost estimating. An example of an indirect cost is— a. Salary of the project manager b. Subcontractor expenses c. Materials used by the project d. Electricity
d. Electricity - Direct costs are incurred for the exclusive benefit of a project. Indirect costs are allocated to a project by its performing organization as a cost of doing business.
40. The CPI on your project is 0.84. This means that you should— a. Place emphasis on improving the timeliness of the physical progress b. Reassess the life-cycle costs of your product, including the length of the life-cycle phase c. Recognize that your original estimates were fundamentally flawed, and your project is in an atypical situation d. Place emphasis on improving the productivity by which work was being performed
d. Place emphasis on improving the productivity by which work was being performed - CPI measures efficiency of the physical progress accomplished compared to the baseline.
28. Control accounts— a. Are charge accounts for personnel time management b. Summarize project costs at level 2 of the WBS c. Identify and track management reserves d. Represent the basic level at which project performance is measured and reported
d. Represent the basic level at which project performance is measured and reported - Relative to the WBS
32. Assume you have used reserve analysis as a tool and technique in Control Costs. However, during your project risk identification and subsequent analysis of the identified risks was ongoing. In fact you had a risk expert on your team. This means you may need to— a. Use management reserve b. Rebaseline your cost estimate c. Perform an assumptions analysis d. Request additional contingency reserves for your budget
d. Request additional contingency reserves for your budget - Reserves may be used as planned to cover risk response costs which indicates that a request for more is acceptable if there is continued risk.
13. As of the fourth month on the Acme project, cumulative planned expenditures were $100,000. Actual expenditures totaled $120,000. How is the Acme project doing? a. It is ahead of schedule. b. It is in trouble because of a cost overrun. c. It will finish within the original budget. d. The information is insufficient to make an assessment.
d. The information is insufficient to make an assessment. - We are not given how much work has been completed to analyze project performance.
