Financial Management for Project Managers Performance Measurement in Accounting 4

Question 1

A project manager is evaluating two mutually exclusive projects. Project A has an NPV of $80,000 and Project B has an NPV of $120,000. Which should be selected if budget allows only one?

Accepted Answer

Project B, because it has the higher NPV

Answer

When choosing between mutually exclusive projects, the one with the higher NPV creates the most organizational value.

Question 2

In cost accounting, what distinguishes a 'sunk cost' from other project costs?

Accepted Answer

It has already been incurred and cannot be recovered regardless of future decisions

Answer

Sunk costs are past expenditures that are irrelevant to future decision-making because they cannot be recovered.

Question 3

A project's SPI is 0.85 and CPI is 0.90. Which corrective action addresses BOTH underperformance indicators simultaneously?

Accepted Answer

Crash the schedule using overtime while identifying cost reduction opportunities

Answer

Crashing with simultaneous cost controls can improve both schedule (SPI) and cost (CPI) performance concurrently.

Question 4

Which depreciation method allocates cost evenly over an asset's useful life and is simplest to apply for project accounting?

Accepted Answer

Straight-line depreciation

Answer

Straight-line depreciation divides cost minus salvage value equally across all years of useful life.

Question 5

A control account in Earned Value Management is best described as:

Accepted Answer

A management control point where scope, schedule, and budget are integrated and performance is measured

Answer

Control accounts are management control points in the WBS where EVM integrates scope, schedule, and cost for measurement.

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Performance Measurement in Accounting 4