CPE Cost Estimation & Budget Control 3 — Questions and Answers
Question 1: Which estimating method is most accurate but also the most time-consuming?
- Analogous estimating
- Parametric estimating
- Bottom-up estimating (Correct answer)
- Expert judgment
Correct answer: Bottom-up estimating
Bottom-up estimating requires detailed estimation of each work package, making it the most accurate and most labor-intensive method.
Question 2: In earned value management, what does the Budget at Completion (BAC) represent?
- The actual cost of work performed to date
- The total planned value when the project is complete (Correct answer)
- The earned value at project completion
- The estimate at completion based on current CPI
Correct answer: The total planned value when the project is complete
BAC is the total authorized budget for the project, representing the sum of all planned values at completion.
Question 3: A project manager notices the SPI is 0.8 and CPI is 0.9. Which statement is most accurate?
- The project is ahead of schedule and under budget
- The project is behind schedule and over budget (Correct answer)
- The project is on schedule but over budget
- The project is behind schedule but under budget
Correct answer: The project is behind schedule and over budget
SPI < 1 means behind schedule; CPI < 1 means over budget — both performance indices are below 1.
Question 4: What is the purpose of a cost baseline in project management?
- To document lessons learned about cost overruns
- To serve as the approved time-phased budget against which performance is measured (Correct answer)
- To record the actual costs of all project activities
- To establish the profit margin for the project
Correct answer: To serve as the approved time-phased budget against which performance is measured
The cost baseline is the approved, time-phased budget used to measure and monitor project cost performance.
Question 5: Rough Order of Magnitude (ROM) estimates typically carry an accuracy range of:
- -5% to +10%
- -10% to +25%
- -25% to +75% (Correct answer)
- -50% to +100%
Correct answer: -25% to +75%
ROM estimates are typically accurate within -25% to +75% and are used in early project phases when limited information is available.
Question 6: When applying the three-point estimating (PERT) formula for cost, what weights are applied to optimistic (O), most likely (M), and pessimistic (P)?
- O×1, M×2, P×1 divided by 4
- O×1, M×4, P×1 divided by 6 (Correct answer)
- O×2, M×2, P×2 divided by 6
- O×1, M×3, P×2 divided by 6
Correct answer: O×1, M×4, P×1 divided by 6
The PERT formula is (O + 4M + P) / 6, giving the most weight to the most likely estimate.
Question 7: Which document formally authorizes the project cost baseline and is approved by stakeholders?
- Project Charter
- Cost Management Plan
- Project Budget (Correct answer)
- Cost Performance Report
Correct answer: Project Budget
The approved Project Budget (which includes the cost baseline plus management reserve) is formally authorized by stakeholders.
CPE Cost Estimation & Budget Control 3
Which estimating method is most accurate but also the most time-consuming?