# FREE Cost Management Questions and Answers

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#### Which of the following about the project's current state is true?

Correct! Wrong!

540 - 650 = -110 for CV = EV - AC (negative cost variance)
540 - 630 = -90 for SV = EV - PV (negative schedule variance)
Projects that have negative cost variance are overbudget.
Project is behind schedule if the schedule variance is negative.

#### Project manager Peter is providing an update on the state of his endeavor. He anticipates that the project will be completed a month earlier than expected based on the performance indices. He does anticipate that the project will cost more than anticipated. What can you tell us about the project's schedule performance index (SPI)?

Correct! Wrong!

Project is ahead of schedule if SPI > 1.0.
CPI 1.0: The project's budget was exceeded.

#### If a project has an earned value (EV) of \$1,000, an actual cost (AC) of \$950, and a planned value (PV) of \$1,000, what is the cost variance (CV)?

Correct! Wrong!

The difference between a project's earned value (EV) and actual cost (AC) is measured by the project management metric known as cost variance (CV). CV is calculated as CV = EV - ACG. A favorable outcome means the project came in \$50 under budget.

#### A minor scope change was requested by a customer, who expects it to be finished quickly and cheaply. The project manager thinks they have enough authority to decide for themselves, but they are unsure. The project manager should now decide what to do.

Correct! Wrong!

The project manager in this instance is unsure of their authority to decide on the minor scope change that the customer has requested. The best course of action in these circumstances is to adhere to the formal change control process to ensure that the change request is properly evaluated and approved.

#### What will your schedule variance be at the conclusion of a project?

Correct! Wrong!

The Schedule Variance (SV) will be equal to zero at the conclusion of a project. In project management, schedule variance is a metric used to assess how well a project is progressing in terms of its schedule at a given time.

#### The project manager made the choice to include indirect costs in his cost estimate while overseeing a big project. Which of the following statements is accurate if indirect costs are factored into estimates?

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Indirect costs, which are usually incurred at higher levels like management, administrative support, or shared resources, are necessary expenditures for the operation and completion of a large project. Depending on the level of detail needed for cost estimation and budgeting, indirect costs are allocated.

#### An index of cost performance (CPI) of 0.89 indicates:

Correct! Wrong!

The CPI divides earned value (EV) by planned value to determine how well a project is performing in relation to its budget (PV). A CPI of 0.89 indicates 11 cents more than anticipated work, possibly as a result of rising costs or scheduling delays. If the CPI is below 1.0, project managers can spot potential issues before they become serious and take corrective action.

#### What kind of expense is an example of a cost for the particular project the cost of operating a project management office?

Correct! Wrong!

As it supports numerous projects within the organization and is not directly connected to any one project activity, the cost of running a project management office is an example of an indirect cost.

#### The project manager observes that the cost performance index (CPI) is 12.5 and the schedule performance index (SPI) is 0.75 when analyzing a project for monthly status reporting. The project manager wants to stress that the project is in control before presenting the first project status review. How should the project manager update the project's stakeholders on its status?

Correct! Wrong!

With an SPI of 0.75, the project is behind schedule and moving more slowly than anticipated. Cost effectiveness is indicated by a CPI of 1.25. As stressing that a situation is "under control" does not reflect reality, the project manager must be open and give stakeholders accurate updates.

#### Cost estimates are being used by the project manager to create a baseline for gauging project performance during the monitoring phase. What process is the project manager currently working on?

Correct! Wrong!

The project manager finalizes the project's budget based on the cost estimates during the "Determine Budget" process, and this budget serves as the cost baseline for monitoring and managing cost performance during the project's monitoring phase.

#### For Motor Cars, Corp., you oversee projects. For the Human Resources division, you are working on a project that will take a year to complete. The EV and PV are calculated at \$35,000 and \$45,000, respectively, three months into the project. Which of the options below best encapsulates the SV value?

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The Schedule Variance (SV), which represents a project that is \$10,000 behind schedule after the first three months, is calculated using the formula SV = EV - PV.

#### A project manager is directing her team in the development of the s-curve, cost baseline, and requirements for project funding. Which process is being led by the project manager's team?

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An essential component of project cost management is setting the project budget, which the project manager guides the team through. They estimate the costs of individual tasks and combine them to produce the overall budget, which takes into account labor, supplies, machinery, and resources. To make sure the budget is reasonable and in line with the project's goals, factors like scope, schedule, resource availability, and risk assessments are taken into account. In order to keep the project financially on track, the project budget is used as a point of reference for tracking and controlling costs, comparing actual spending, and managing deviations.

#### A project that ought to have been 70% finished by this point is only 55% finished. The project's total budget is US\$210,000, but only US\$162,000 has actually been spent as of this writing. What are the project's cost performance index (CPI) and scheduled performance index (SPI)?

Correct! Wrong!

EV = Actual% * BAC, or 0.55 times \$210,000, or \$115,500.
PV = Plan% * BAC, or 0.70 times \$210,000, or \$147,000.
AC = \$162,000 (given) (given)
\$115,500/\$147,000 = 0.785 or 0.79 for SPI = EV/PV.
\$115,500/\$162,000 = 0.71 when CPI = EV/AC.

#### A project uses staff hours as the unit of measure for resources, rounds activity estimate data to the nearest \$100, and has a variance threshold of 10% deviation from the initial plan. Usually, these would be recorded in the

Correct! Wrong!

The Cost Management Plan is typically where the rounding of activity estimates data, the unit of measure for resources, and the variance threshold for deviation from the baseline plan are documented. The Cost Management Plan, which is a part of the Project Management Plan, describes how the costs of the project will be predicted, budgeted for, tracked, and managed over the course of the project.

#### The cost performance index (CPI) is 1.1 and the schedule performance index (SPI) is 0.95, according to a project manager who is preparing a project status update. What is the progress of the project?

Correct! Wrong!

While the Schedule Performance Index (SPI) gauges the project's schedule efficiency, the Cost Performance Index (CPI) gauges the project's cost efficiency.

#### It has been 7 months since a project began. The cost performance index (CPI), according to the project manager, is 0.80. Trend analysis indicates that the CPI is on the decline. The project manager should now decide what to do.

Correct! Wrong!

The ratio of earned value to actual cost is used to calculate the cost performance index (CPI), which measures a project's cost effectiveness. A downward trend suggests declining performance that will result in cost overruns. The project manager must address the overruns and boost efficiency to deal with these problems. The best course of action is not to reset the cost baseline.