PMBOK Project Cost Management Questions and Answers Flashcards

What is the Cost Performance Index (CPI) formula and what does a CPI of 0.85 indicate?

Answer: CPI = EV/AC; for every dollar spent, only $0.85 of value is being produced (over budget)

CPI = EV/AC; a value of 0.85 means only 85 cents of planned value is being realized for every dollar actually spent, indicating the project is over budget.

Which cost management concept refers to an approved change to the cost baseline?

Answer: Re-baselining

Re-baselining involves formally approving changes to the cost baseline, which should only occur in response to authorized scope changes.

What is the Estimate to Complete (ETC) in Earned Value Management?

Answer: The expected cost to finish the remaining project work

Estimate to Complete (ETC) is the expected cost needed to finish all the remaining project work, calculated as EAC minus AC.

What is the difference between direct costs and indirect costs in project cost management?

Answer: Direct costs are attributable to a specific project; indirect costs are shared across multiple projects or the organization

Direct costs are directly attributable to a specific project (e.g., team salaries, materials), while indirect costs are overhead shared across projects (e.g., utilities, administrative staff).

Which formula is used to calculate the To-Complete Performance Index (TCPI) based on Budget at Completion (BAC)?

Answer: TCPI = (BAC - EV) / (BAC - AC)

TCPI = (BAC - EV) / (BAC - AC) measures the required cost performance to complete remaining work within the original budget.

Cost aggregation in the Determine Budget process means:

Answer: Rolling up work package cost estimates by WBS level to establish the project budget

Cost aggregation sums up work package estimates up through the WBS hierarchy to determine the total project budget at each level.