Free Project Cost Management Questions and Answers

Question 1

What do you call the money that is included in a cost estimate to cover potential future events that can only be partially planned for (also known as "known unknowns") and is included in the project cost baseline?

Accepted Answer

Contingency Reserves

Answer

Contingency reserves are funds included in the project cost baseline to cover potential future events that can only be partially planned for, often referred to as 'known unknowns.' These reserves are allocated to manage identified risks whose impact or occurrence is uncertain. They are an integral part of the project's estimated cost and are used by the project manager to address these specific risks.

Question 2

An organization's budget is often allocated funds based on a cost estimate, or ________.

Accepted Answer

Budgetary Estimate

Answer

A budgetary estimate is a type of cost estimate used early in the project lifecycle, typically during the planning phase, to allocate funds and secure an organization's budget. It provides a more refined estimate than a Rough Order of Magnitude (ROM) but is less precise than a definitive estimate, often having an accuracy range of -10% to +25%. This estimate helps in financial planning and resource allocation at a higher level.

Question 3

What does revenue less expense mean?

Accepted Answer

Profit

Answer

Profit is a fundamental financial concept calculated as the total revenue earned minus the total expenses incurred over a specific period. It represents the financial gain or loss of a business or project. This metric is crucial for assessing financial performance and viability.

Question 4

What are the terms of the expenses or advantages that may be quickly calculated in dollars?

Accepted Answer

Tangible Costs

Answer

Tangible costs (or benefits) are those expenses or advantages that can be easily quantified and measured in monetary terms. These are direct, measurable financial values that have a clear impact on the project's budget or financial outcome. They are straightforward to include in cost estimates and financial analyses, providing concrete data for decision-making.

Question 5

What is planned value less earned value?

Accepted Answer

Schedule Variance

Answer

Schedule Variance (SV) is a key Earned Value Management (EVM) metric that measures the difference between the Earned Value (EV) and the Planned Value (PV). While typically calculated as EV - PV, the concept represents the deviation from the planned schedule. A positive SV indicates the project is ahead of schedule, while a negative SV means it is behind schedule, providing an objective measure of schedule performance.

Project Management Practice Test

Project Management Practice Test

Free Project Cost Management Questions and Answers