Performance Measurement in Accounting Flashcards
7 cards from real Financial Management for Project Managers practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Performance Measurement in Accounting flashcards as text
Which accounting concept allocates indirect costs to projects based on a predetermined rate applied to a cost driver such as direct labor hours?
Answer: Overhead absorption rate
The overhead absorption rate spreads indirect costs across projects using a cost driver like direct labor hours.
A project manager reviews a variance report showing an unfavorable efficiency variance. What does this most likely indicate?
Answer: More resources were used than planned to produce the actual output
An unfavorable efficiency variance means actual input quantity exceeded the standard quantity for the actual output produced.
In project financial reporting, what is a 'management reserve'?
Answer: Budget set aside for unknown unknowns outside the performance measurement baseline
Management reserve is held outside the PMB for unknown-unknown risks and requires management approval to access.
A project uses a 50/50 rule for measuring earned value. A task is started but not completed in the reporting period. What EV is credited?
Answer: 50% of the task budget
The 50/50 rule credits 50% of the task budget when work begins and the remaining 50% upon completion.
What financial metric best measures a project's return relative to its cost for investment decision-making?
Answer: Return on Investment (ROI)
ROI expresses net benefit as a percentage of cost, making it the most direct measure of return relative to investment.
A project's Estimate to Complete (ETC) is calculated as EAC - AC. What assumption underlies this approach?
Answer: Past cost performance is irrelevant and remaining work will be re-estimated from scratch
ETC = EAC - AC represents a bottom-up re-estimate that ignores past CPI and forecasts remaining costs independently.
Which earned value reporting term describes the dollar difference between what was planned to be spent and what was actually spent by a given date?
Answer: Cost Variance (CV)
Cost Variance (CV) = EV - AC, capturing the difference between budgeted cost of work performed and actual cost.