CPC Project Budget & Cost Control 1 — Questions and Answers
Question 1: What is the cost baseline in project management?
- The approved time-phased budget used to measure and monitor project cost performance (Correct answer)
- The initial rough estimate made before planning begins
- The total funds allocated by the sponsor
- The sum of all contingency reserves
Correct answer: The approved time-phased budget used to measure and monitor project cost performance
The cost baseline is the approved, time-phased budget that serves as the reference point for earned value analysis.
Question 2: Analogous estimating uses:
- Historical data from similar past projects to estimate cost or duration (Correct answer)
- Expert opinion from subject matter experts
- Mathematical models to calculate estimates
- Bottom-up summation of all work package estimates
Correct answer: Historical data from similar past projects to estimate cost or duration
Analogous estimating is a top-down technique that leverages actual results from similar previous projects.
Question 3: Which cost estimate type has the widest accuracy range and is produced earliest in the project?
- Rough order of magnitude (ROM) (Correct answer)
- Definitive estimate
- Bottom-up estimate
- Parametric estimate
Correct answer: Rough order of magnitude (ROM)
A ROM estimate is produced with minimal information and typically carries an accuracy range of -25% to +75%.
Question 4: Management reserve differs from contingency reserve in that:
- Management reserve covers unknown unknowns, while contingency reserve covers known risks (Correct answer)
- Management reserve is controlled by the team; contingency reserve by the sponsor
- They are the same thing with different names
- Contingency reserve covers unknown unknowns
Correct answer: Management reserve covers unknown unknowns, while contingency reserve covers known risks
Contingency reserve addresses identified risks; management reserve handles unforeseen issues that fall outside the risk register.
Question 5: A project has spent $50,000 but was supposed to spend $40,000 by this point. This means the project is:
- Over budget (cost overrun) (Correct answer)
- Under budget (cost saving)
- On schedule
- Ahead of schedule
Correct answer: Over budget (cost overrun)
Spending more than planned at a given point signals a cost overrun that must be investigated and addressed.
Question 6: Parametric estimating calculates cost or duration by:
- Multiplying a unit cost or rate by a measurable quantity (Correct answer)
- Averaging historical project costs
- Summing individual work package estimates
- Using expert judgment from the team
Correct answer: Multiplying a unit cost or rate by a measurable quantity
Parametric estimating uses a statistical relationship between project parameters (e.g., cost per square foot) to produce estimates.
CPC Project Budget & Cost Control 1
What is the cost baseline in project management?