CPC Project Budget & Cost Control 2 — Questions and Answers
Question 1: Earned Value (EV) represents:
- The budgeted value of work actually completed to date (Correct answer)
- The actual money spent to date
- The planned budget for work scheduled to date
- The remaining budget for the project
Correct answer: The budgeted value of work actually completed to date
EV measures how much of the budget has been 'earned' by completing work, independent of what was actually spent.
Question 2: A Schedule Performance Index (SPI) of 0.8 means the project is:
- Getting only $0.80 of schedule value for every $1.00 of planned work—behind schedule (Correct answer)
- Spending $0.80 for every $1.00 budgeted—under budget
- Ahead of schedule by 20%
- On schedule with 20% contingency remaining
Correct answer: Getting only $0.80 of schedule value for every $1.00 of planned work—behind schedule
SPI = EV / PV; a value below 1.0 indicates the project is behind schedule relative to the plan.
Question 3: The Cost Performance Index (CPI) is calculated as:
- EV divided by AC (Earned Value ÷ Actual Cost) (Correct answer)
- AC divided by PV (Actual Cost ÷ Planned Value)
- BAC divided by EV (Budget at Completion ÷ Earned Value)
- PV divided by AC (Planned Value ÷ Actual Cost)
Correct answer: EV divided by AC (Earned Value ÷ Actual Cost)
CPI = EV / AC; a CPI above 1 means the project is getting more value per dollar spent than planned.
Question 4: Which term describes the total budget authorized for the project?
- Budget at Completion (BAC) (Correct answer)
- Estimate at Completion (EAC)
- Estimate to Complete (ETC)
- Planned Value (PV)
Correct answer: Budget at Completion (BAC)
BAC is the total approved budget for the project and serves as the denominator in many EVM calculations.
Question 5: A project coordinator notices that costs are consistently higher than planned. The BEST corrective action is to:
- Analyze the root cause of the overrun and implement corrective actions to realign costs (Correct answer)
- Increase the project budget to match actual spending
- Ignore the variance if the project is on schedule
- Reduce scope to bring costs in line without sponsor approval
Correct answer: Analyze the root cause of the overrun and implement corrective actions to realign costs
Root cause analysis ensures the corrective action addresses the actual problem rather than just its symptoms.
Question 6: Which cost component is directly tied to the amount of work performed and increases as more work is done?
- Variable cost (Correct answer)
- Fixed cost
- Sunk cost
- Indirect cost
Correct answer: Variable cost
Variable costs change in proportion to the volume of work, such as materials consumed or hours worked.
CPC Project Budget & Cost Control 2
Earned Value (EV) represents: