CAPM Cost Management 5 — Questions and Answers
Question 1: A project manager notices the CPI has been consistently 0.80 for the past three reporting periods. Using the EAC = BAC / CPI formula, what assumption is being made?
- Future work will be at budgeted rates
- The remaining work has zero cost
- Current efficiency will continue throughout the project (Correct answer)
- The project scope will be reduced
Correct answer: Current efficiency will continue throughout the project
EAC = BAC / CPI assumes current cost efficiency (CPI) will persist for all remaining work on the project.
Question 2: What is the formula for Variance at Completion (VAC)?
- VAC = EAC - BAC
- VAC = BAC - EAC (Correct answer)
- VAC = EV - AC
- VAC = PV - EV
Correct answer: VAC = BAC - EAC
VAC = BAC - EAC; a positive VAC indicates the project will finish under budget, while negative means over budget.
Question 3: In the cost management plan, the level of precision refers to:
- The number of decimal places used in cost estimates
- The rounding rules applied to cost estimates (Correct answer)
- The frequency of cost reporting
- The tools used to develop cost estimates
Correct answer: The rounding rules applied to cost estimates
Level of precision defines the rounding convention for activity cost estimates, such as rounding to the nearest dollar or thousand.
Question 4: A project manager is asked to provide a rough order of magnitude (ROM) estimate. What accuracy range is typically associated with ROM estimates?
- -5% to +10%
- -10% to +25%
- -25% to +75% (Correct answer)
- -50% to +100%
Correct answer: -25% to +75%
ROM estimates typically have an accuracy range of -25% to +75%, as they are prepared early with limited information.
Question 5: Which document formally authorizes the project manager to apply organizational resources and includes a summary-level budget?
- Project management plan
- Project charter (Correct answer)
- Cost management plan
- Scope baseline
Correct answer: Project charter
The project charter authorizes the project, names the project manager, and includes a summary budget.
Question 6: When a project finishes with AC = $95,000 and BAC = $100,000, and EV = $100,000, what is the final Cost Variance?
- -$5,000
- +$5,000 (Correct answer)
- $0
- $100,000
Correct answer: +$5,000
CV = EV - AC = $100,000 - $95,000 = +$5,000, meaning the project finished $5,000 under budget.
Question 7: Life cycle costing is a technique that considers:
- Only the project's development costs
- Only the operational costs after deployment
- The total cost of ownership including development, operation, and disposal (Correct answer)
- The cost of each phase as a percentage of the total budget
Correct answer: The total cost of ownership including development, operation, and disposal
Life cycle costing evaluates total cost of ownership across the entire product life cycle, including acquisition, operation, maintenance, and disposal.
CAPM Cost Management 5
A project manager notices the CPI has been consistently 0.80 for the past three reporting periods.
Using the EAC = BAC / CPI formula, what assumption is being made?