CPE Cost Analysis and Budgeting 2

Question 1

A project budget shows a Cost Performance Index (CPI) of 0.85. What does this indicate?

Accepted Answer

The project is getting $0.85 of value for every $1 spent

Answer

A CPI of 0.85 means the project is over budget, receiving only $0.85 in earned value for every dollar actually spent.

Question 2

Which budgeting technique allocates costs based on the percentage of total project work each activity represents?

Accepted Answer

Proportional allocation

Answer

Proportional allocation distributes budget across activities based on their share of total project scope or work units.

Question 3

When performing a cost-benefit analysis, the payback period is defined as:

Accepted Answer

The time required to recover the initial investment from net cash flows

Answer

The payback period measures how long it takes for cumulative net cash inflows to equal the initial capital investment.

Question 4

A cost estimator is reviewing a budget with a Management Reserve. What is the primary purpose of a Management Reserve?

Accepted Answer

To handle unknown unknowns and unforeseen scope changes

Answer

Management Reserve is held for unknown-unknown risks and unexpected events outside the project baseline, not for planned contingencies.

Question 5

Which of the following best describes a 'should-cost' analysis in project estimating?

Accepted Answer

An independent government or owner estimate of what work should reasonably cost

Answer

A should-cost analysis is an independent estimate developed by the owner or client to assess what a product or service should reasonably cost, used to evaluate contractor proposals.

(CPE) Certified Professional Estimator Practice Test

(CPE) Certified Professional Estimator Practice Test

CPE Cost Analysis and Budgeting 2