CCT Cost Control & Monitoring 2 — Questions and Answers
Question 1: A project has a BAC of $500,000, an EV of $300,000, and an AC of $350,000. What is the Cost Performance Index (CPI)?
- 0.86 (Correct answer)
- 1.17
- 0.60
- 0.70
Correct answer: 0.86
CPI = EV / AC = $300,000 / $350,000 = 0.857, meaning the project is over budget.
Question 2: Which cost control technique involves setting a maximum allowable cost for a project element and requiring redesign if that threshold is exceeded?
- Target costing
- Design-to-cost (Correct answer)
- Value engineering
- Life-cycle costing
Correct answer: Design-to-cost
Design-to-cost establishes a cost ceiling for a system or component and drives design choices to stay within that limit.
Question 3: A Variance at Completion (VAC) of -$40,000 on a project means:
- The project will finish $40,000 under budget
- The project is currently $40,000 over budget
- The project is forecasted to overrun by $40,000 at completion (Correct answer)
- The project has $40,000 in contingency remaining
Correct answer: The project is forecasted to overrun by $40,000 at completion
VAC = BAC − EAC; a negative VAC indicates the project is forecast to cost more than its budget at completion.
Question 4: In a cost monitoring system, a 'cost trend report' primarily serves to:
- Document historical expenditures for audit purposes
- Identify patterns indicating whether costs are improving or deteriorating over time (Correct answer)
- Allocate contingency reserves to work packages
- Calculate earned value for each reporting period
Correct answer: Identify patterns indicating whether costs are improving or deteriorating over time
A cost trend report tracks cost performance metrics over successive periods to reveal whether the project's cost efficiency is improving or worsening.
Question 5: Which of the following best describes a 'management reserve' in project cost control?
- Budget set aside for known risks identified in the risk register
- Funds held by management for unknown unknowns outside project scope (Correct answer)
- Contingency added to each work package estimate
- The difference between PV and EV at a reporting point
Correct answer: Funds held by management for unknown unknowns outside project scope
Management reserve covers unknown risks (unknown unknowns) and is controlled by management, not the project manager.
Question 6: When applying the 50/50 rule for earned value measurement, credit is given as:
- 100% when the task is completed
- 50% when started, 50% when complete (Correct answer)
- 50% based on hours spent, 50% on deliverables
- Evenly split across all reporting periods
Correct answer: 50% when started, 50% when complete
The 50/50 rule awards 50% of the budget when work starts and the remaining 50% only upon completion.
Question 7: A project manager notices that the SPI has been consistently below 1.0 for the past three periods. This most likely indicates:
- The project is consistently over budget
- The project is consistently behind schedule (Correct answer)
- Cost estimates were too optimistic
- Scope creep has increased the BAC
Correct answer: The project is consistently behind schedule
SPI = EV / PV; an SPI below 1.0 means less work has been accomplished than planned, indicating a schedule delay.
CCT Cost Control & Monitoring 2
A project has a BAC of $500,000, an EV of $300,000, and an AC of $350,000.
What is the Cost Performance Index (CPI)?