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Project Budgeting & Financial Control Flashcards

7 cards from real PMI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Project Budgeting & Financial Control flashcards as text

  1. A project manager notices that the Cost Performance Index (CPI) is 0.85. What does this indicate?

    Answer: The project is getting $0.85 in value for every $1 spent

    A CPI of 0.85 means the project is over budget, receiving only $0.85 of earned value for every dollar spent.

  2. Which reserve type is set aside for unknown-unknown risks and is controlled by senior management, not the project manager?

    Answer: Management reserve

    Management reserve covers unknown-unknown risks and requires senior management approval to access.

  3. A project has a BAC of $500,000, EV of $200,000, and AC of $250,000. What is the Estimate to Complete (ETC) using the typical EAC formula?

    Answer: $375,000

    EAC = BAC/CPI = $500,000/0.80 = $625,000; ETC = EAC − AC = $625,000 − $250,000 = $375,000.

  4. During project execution, the sponsor asks for additional features not in scope. The PM must update the cost baseline. Which process governs this?

    Answer: Perform Integrated Change Control

    Perform Integrated Change Control evaluates all change requests and authorizes updates to baselines including the cost baseline.

  5. What is the primary purpose of a funding limit reconciliation in project cost management?

    Answer: To align project expenditures with funding availability constraints

    Funding limit reconciliation adjusts the schedule of work to match when funds are actually available, preventing cash flow problems.

  6. A project manager wants to understand the total amount of money the organization expects to spend on a project including contingency. Which term best describes this?

    Answer: Project budget

    The project budget equals the cost baseline plus management reserve, representing the total authorized funds.

  7. Which cost estimating technique produces the LEAST accurate estimate but requires the least amount of project detail?

    Answer: Analogous estimating

    Analogous estimating uses historical data from similar projects and is the quickest but least accurate technique.