CPE Cost Analysis and Budgeting 3

Question 1

Which type of cost escalation factor accounts for changes in the purchasing power of money over time on a multi-year project?

Accepted Answer

Inflation escalation

Answer

Inflation escalation factors adjust future-year costs to account for the expected decrease in purchasing power over the project duration.

Question 2

A project has Total Budget at Completion (BAC) of $500,000 and the Estimate at Completion (EAC) is $590,000. What is the Variance at Completion (VAC)?

Accepted Answer

-$90,000

Answer

VAC = BAC − EAC = $500,000 − $590,000 = −$90,000, indicating a projected cost overrun of $90,000.

Question 3

In life-cycle costing, which phase typically represents the largest cumulative cost for a facility?

Accepted Answer

Operations and maintenance over the facility's life

Answer

Operations and maintenance costs typically dwarf initial construction costs over a facility's full life cycle, often representing 60–80% of total life-cycle cost.

Question 4

When using the 'Estimate to Complete' (ETC) formula ETC = (BAC − EV) / CPI, what assumption is being made?

Accepted Answer

Future work will continue at the same efficiency as work completed to date

Answer

Dividing remaining work by the current CPI assumes the project will continue performing at the same cost efficiency as it has so far.

Question 5

A cost estimator applies a 'square foot cost' method to a new office building. This is an example of which estimating approach?

Accepted Answer

Parametric estimating

Answer

Parametric estimating uses statistical relationships between historical costs and project parameters (like square footage) to produce rapid cost estimates.

(CPE) Certified Professional Estimator Practice Test

(CPE) Certified Professional Estimator Practice Test

CPE Cost Analysis and Budgeting 3