Financial Management for Project Managers Cost Estimation and Budgeting 3

Question 1

Fixed costs in project management are best described as costs that:

Accepted Answer

Remain constant regardless of changes in project activity level

Answer

Fixed costs do not change with the level of project output or activity, such as equipment lease payments or facility rental fees.

Question 2

Variable costs in a project are those that:

Accepted Answer

Change in direct proportion to the level of project activity or output

Answer

Variable costs increase or decrease proportionally with project activity, such as raw materials consumed or hourly labor costs based on hours worked.

Question 3

A project budget at completion (BAC) is $200,000. The project is 40% complete. What is the Planned Value (PV) if the project is on schedule?

Accepted Answer

$80,000

Answer

If the project is on schedule and 40% complete, the Planned Value equals 40% of the BAC: 0.40 × $200,000 = $80,000.

Question 4

The three-point estimating technique uses optimistic, pessimistic, and most likely estimates. The PERT formula is:

Accepted Answer

(O + 4M + P) / 6

Answer

The PERT (Program Evaluation and Review Technique) formula weights the most likely estimate four times: (Optimistic + 4 × Most Likely + Pessimistic) / 6.

Question 5

Which cost estimating technique is most accurate but also the most time-consuming?

Accepted Answer

Bottom-up estimating

Answer

Bottom-up estimating is the most accurate technique because it estimates every individual work package, but it requires the most time and detailed WBS information.

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Cost Estimation and Budgeting 3