Financial Management for Project Managers Cost Estimation and Budgeting 2

Question 1

Management reserves in a project budget are intended for:

Accepted Answer

Unknown unknowns or unforeseen scope changes

Answer

Known risks identified in the risk register

Answer

Routine administrative project expenses

Answer

Bonuses and incentives for the project team

Question 2

A project has a total budget of $500,000, a cost baseline of $450,000, and contingency reserves of $30,000. What is the management reserve?

Accepted Answer

$20,000

Answer

$30,000

Answer

$50,000

Answer

$80,000

Question 3

Analogous cost estimating is most appropriate when:

Accepted Answer

Historical data from similar past projects is available and time is limited

Answer

Detailed project scope and WBS are fully defined

Answer

The project involves entirely new and unique technology

Answer

Precise parametric models have been developed

Question 4

Which document formally authorizes the project manager to apply organizational resources and establishes the cost budget?

Accepted Answer

Project charter

Answer

Project scope statement

Answer

Cost management plan

Answer

Work breakdown structure

Question 5

Life cycle costing in project financial management considers:

Accepted Answer

Total costs including acquisition, operation, maintenance, and disposal

Answer

Only the initial capital costs of the project

Answer

The cost of the project management team only

Answer

Only recurring operational costs after project completion

Question 6

When should a project manager formally re-baseline the project cost baseline?

Accepted Answer

Only after an approved change request that significantly alters project scope

Answer

Whenever actual costs exceed planned costs

Answer

At the end of every reporting period

Answer

When the contingency reserve falls below 10%