Free NCMA Business & Financial Management Questions and Answers

Question 1

What is the primary purpose of Earned Value Management (EVM) in contract financial management?

Accepted Answer

To track progress and predict final costs

Answer

Earned Value Management (EVM) is a project management methodology used to objectively measure project performance and progress by integrating scope, schedule, and cost data. It assesses how much work has been completed versus planned and how much it cost, providing a comprehensive view of project health. EVM helps predict future performance and final project costs, offering early warning signs of potential issues.

Question 2

Which FAR Part governs the allowability of contract costs?

Accepted Answer

FAR Part 31

Answer

FAR Part 31, 'Contract Cost Principles and Procedures,' provides the detailed rules and guidelines for determining the allowability of costs incurred by contractors under government contracts. It defines what constitutes an allowable, allocable, and reasonable cost, which is crucial for cost-reimbursement contracts and for establishing indirect cost rates in all contract types. Adherence to these principles ensures proper stewardship of taxpayer funds.

Question 3

What is the purpose of a Forward Pricing Rate Agreement (FPRA)?

Accepted Answer

To predetermine indirect cost rates for proposals

Answer

A Forward Pricing Rate Agreement (FPRA) is a written agreement between the government and a contractor that establishes indirect cost rates (e.g., overhead, G&A) for a specified future period. These predetermined rates are then used in pricing future contract proposals, streamlining the negotiation process and reducing administrative burden. FPRAs provide stability and predictability for both parties in cost estimation.

Question 4

Which cost is typically UNALLOWABLE under FAR Part 31?

Accepted Answer

Entertainment expenses

Answer

Under FAR Part 31, 'Contract Cost Principles and Procedures,' certain costs are explicitly deemed unallowable, meaning they cannot be charged to government contracts. Entertainment expenses, including costs for amusement, social activities, and related gratuities, are generally considered unallowable. This ensures that taxpayer funds are used for direct contract performance and not for non-essential or personal activities.

Question 5

What does the Cost Performance Index (CPI) measure in EVM?

Accepted Answer

Cost efficiency of work performed

Answer

The Cost Performance Index (CPI) is a key metric in Earned Value Management (EVM) that assesses the cost efficiency of work performed. It is calculated by dividing the Earned Value (EV) by the Actual Cost (AC). A CPI greater than 1.0 indicates that the project is under budget for the work accomplished, while a CPI less than 1.0 signifies that it is over budget.

NCMA - National Contract Management Association Certification Practice Test

NCMA - National Contract Management Association Certification Practice Test

Free NCMA Business & Financial Management Questions and Answers