Financial Management for Project Managers Performance Measurement in Accounting 5

Question 1

A project manager calculates a Variance at Completion (VAC) of -$30,000. What is the correct interpretation?

Accepted Answer

The project is forecast to finish $30,000 over budget

Answer

VAC = BAC - EAC; a negative VAC means EAC exceeds BAC, forecasting a cost overrun at project completion.

Question 2

Which performance reporting technique compares actual results to a rolling forecast rather than a fixed baseline?

Accepted Answer

Forecast variance analysis

Answer

Forecast variance analysis measures actual performance against a continuously updated forecast rather than the original plan.

Question 3

A construction project uses the 'units completed' EVM technique. If 400 of 1,000 planned units are finished and the budget is $100,000, what is the Earned Value?

Accepted Answer

$40,000

Answer

EV = (Units Completed / Total Units) × BAC = (400 / 1,000) × $100,000 = $40,000.

Question 4

A project manager is computing a project's break-even point. Which variable is NOT needed for this calculation?

Accepted Answer

Net Present Value

Answer

Break-even point = Fixed Costs / (Price - Variable Cost); NPV is not part of the break-even formula.

Question 5

In the context of project financial control, what is 'cost aggregation'?

Accepted Answer

Summing cost estimates of work packages to higher WBS levels to establish the cost baseline

Answer

Cost aggregation rolls up work package estimates through control accounts to the project level to form the cost baseline.

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Practice Test

Financial Management for Project Managers Performance Measurement in Accounting 5