Financial Management for Project Managers Performance Measurement in Accounting 3

Question 1

Which accounting concept allocates indirect costs to projects based on a predetermined rate applied to a cost driver such as direct labor hours?

Accepted Answer

Overhead absorption rate

Answer

The overhead absorption rate spreads indirect costs across projects using a cost driver like direct labor hours.

Question 2

A project manager reviews a variance report showing an unfavorable efficiency variance. What does this most likely indicate?

Accepted Answer

More resources were used than planned to produce the actual output

Answer

An unfavorable efficiency variance means actual input quantity exceeded the standard quantity for the actual output produced.

Question 3

In project financial reporting, what is a 'management reserve'?

Accepted Answer

Budget set aside for unknown unknowns outside the performance measurement baseline

Answer

Management reserve is held outside the PMB for unknown-unknown risks and requires management approval to access.

Question 4

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?

Accepted Answer

50% of the task budget

Answer

The 50/50 rule credits 50% of the task budget when work begins and the remaining 50% upon completion.

Question 5

What financial metric best measures a project's return relative to its cost for investment decision-making?

Accepted Answer

Return on Investment (ROI)

Answer

ROI expresses net benefit as a percentage of cost, making it the most direct measure of return relative to investment.

Financial Management for Project Managers Practice Test