CAPM Cost Management 4 — Questions and Answers
Question 1: Which output of the Determine Budget process is used as the basis for measuring project cost performance?
- Project funding requirements
- Cost baseline (Correct answer)
- Cost management plan
- Activity cost estimates
Correct answer: Cost baseline
The cost baseline is the key output of Determine Budget and serves as the reference for measuring cost performance.
Question 2: A project has a TCPI of 1.15. What does this mean for the project team?
- The team must spend 15% more to complete the work
- The team must be 15% more efficient than planned to meet the BAC (Correct answer)
- The project is 15% under budget
- The project has a 15% schedule variance
Correct answer: The team must be 15% more efficient than planned to meet the BAC
TCPI > 1.0 means the team must work more efficiently than originally planned to finish within the authorized budget.
Question 3: When should a project manager escalate a cost variance issue through the formal change control process?
- For any cost variance, no matter how small
- When the variance exceeds established thresholds in the cost management plan (Correct answer)
- Only at project completion
- When the sponsor requests a status update
Correct answer: When the variance exceeds established thresholds in the cost management plan
The cost management plan defines thresholds for when variances require escalation through formal change control.
Question 4: Which cost estimating approach requires the most time and detail but typically provides the most accurate estimates?
- Analogous estimating
- Rough order of magnitude
- Bottom-up estimating (Correct answer)
- Parametric estimating
Correct answer: Bottom-up estimating
Bottom-up estimating aggregates estimates for individual work packages, requiring more effort but yielding the highest accuracy.
Question 5: A project's Planned Value at month 6 is $120,000, but the Earned Value is $90,000. What is the Schedule Variance?
- -$30,000 (Correct answer)
- +$30,000
- $120,000
- $90,000
Correct answer: -$30,000
SV = EV - PV = $90,000 - $120,000 = -$30,000, indicating the project is behind schedule.
Question 6: What is the primary difference between a cost estimate and a cost budget?
- Estimates are approved by sponsors; budgets are not
- A budget allocates costs over time and requires formal approval; an estimate does not (Correct answer)
- Estimates include contingency; budgets do not
- Budgets are created before estimates
Correct answer: A budget allocates costs over time and requires formal approval; an estimate does not
A cost budget allocates the cost estimates across the project timeline and requires formal approval to become the cost baseline.
Question 7: Which of the following is an example of a variable cost in a project?
- Equipment rental fee charged monthly
- One-time software license
- Contractor fees paid per deliverable completed (Correct answer)
- Fixed office space rental
Correct answer: Contractor fees paid per deliverable completed
Variable costs change based on usage or output, such as contractor fees tied to deliverables produced.
CAPM Cost Management 4
Which output of the Determine Budget process is used as the basis for measuring project cost performance?