CPM CPM Budget & Cost Management 2 — Questions and Answers
Question 1: Which cost estimation technique calculates cost per unit and multiplies by the number of units?
- Analogous estimating
- Bottom-up estimating
- Parametric estimating (Correct answer)
- Expert judgment
Correct answer: Parametric estimating
Parametric estimating uses statistical relationships between historical data and variables (e.g., cost per square foot) to calculate cost estimates with greater accuracy.
Question 2: In EVM, the Estimate to Complete (ETC) represents:
- The total cost spent on the project so far
- The expected cost to finish all remaining project work (Correct answer)
- The difference between planned and earned value
- The total project budget minus spent funds
Correct answer: The expected cost to finish all remaining project work
ETC is the expected cost of completing the remaining project work, calculated as EAC minus AC when using the current CPI to forecast future performance.
Question 3: What does a negative Cost Variance (CV) indicate in Earned Value Management?
- The project is ahead of schedule
- The project is under budget
- The project is over budget (Correct answer)
- The project has a positive return on investment
Correct answer: The project is over budget
A negative CV (EV minus AC) means more money has been spent than the value of work accomplished, signaling an over-budget condition.
Question 4: Life cycle costing in project management refers to:
- Estimating costs for each phase of the project lifecycle
- Considering the total cost of ownership including operations and maintenance (Correct answer)
- Calculating the depreciation schedule for project assets
- Tracking costs from initiation through closing only
Correct answer: Considering the total cost of ownership including operations and maintenance
Life cycle costing evaluates the total cost of a deliverable over its entire useful life, including acquisition, operations, maintenance, and disposal costs.
Question 5: Which CPM cost control tool shows cumulative planned versus actual cost over time on a graph?
- Gantt chart
- S-curve (Correct answer)
- Responsibility assignment matrix
- Risk probability matrix
Correct answer: S-curve
An S-curve plots cumulative planned value and actual cost over time, forming an S-shaped line that visually highlights cost variance trends.
Question 6: What is the formula for Estimate at Completion (EAC) when assuming future work will be performed at the budgeted rate?
- BAC / CPI
- AC + (BAC - EV) (Correct answer)
- AC + ETC
- EV / AC
Correct answer: AC + (BAC - EV)
EAC = AC + (BAC - EV) assumes remaining work will be completed at the originally planned rate, adding actual costs to date to the remaining budget.
CPM CPM Budget & Cost Management 2
Which cost estimation technique calculates cost per unit and multiplies by the number of units?