PMI Project Budgeting & Financial Control 3 — Questions and Answers
Question 1: A project's Schedule Variance (SV) is −$20,000 and Cost Variance (CV) is +$15,000. Which statement BEST describes the project status?
- Behind schedule and over budget
- Behind schedule but under budget (Correct answer)
- Ahead of schedule and under budget
- Ahead of schedule but over budget
Correct answer: Behind schedule but under budget
Negative SV means behind schedule; positive CV means under budget (earning more value than spent).
Question 2: Which document formally authorizes the project budget and establishes the cost baseline?
- Project charter
- Cost management plan
- Approved cost baseline (Correct answer)
- Work authorization system
Correct answer: Approved cost baseline
The approved cost baseline is the time-phased budget used to measure, monitor, and control project cost performance.
Question 3: A PM is using the To-Complete Performance Index (TCPI) and gets a result of 1.20. What does this mean?
- The project must spend $1.20 for every $1 of remaining work
- The project must earn $1.20 in value for every $1 of remaining budget (Correct answer)
- The project will complete 20% over budget
- The project is 20% efficient on remaining work
Correct answer: The project must earn $1.20 in value for every $1 of remaining budget
TCPI > 1.0 means remaining work must be performed more efficiently than past performance to meet the budget goal.
Question 4: During the planning phase, which technique breaks the project into smaller components to improve the accuracy of cost estimates?
- Parametric estimating
- Bottom-up estimating (Correct answer)
- Reserve analysis
- Monte Carlo simulation
Correct answer: Bottom-up estimating
Bottom-up estimating decomposes work packages into smaller components and aggregates their estimates for higher accuracy.
Question 5: A project manager compares the planned value to actual costs each month. This is an example of which activity?
- Cost budgeting
- Variance analysis (Correct answer)
- Funding limit reconciliation
- Benefit-cost analysis
Correct answer: Variance analysis
Variance analysis compares actual project performance (cost, schedule) against the plan to identify deviations.
Question 6: Which input is MOST important when developing the cost management plan?
- Risk register
- Project charter (Correct answer)
- WBS dictionary
- Lessons learned register
Correct answer: Project charter
The project charter provides the pre-approved financial resources and summary budget that inform the cost management plan.
Question 7: What does a cost baseline NOT include?
- Contingency reserves
- Work package cost estimates
- Control account budgets
- Management reserve (Correct answer)
Correct answer: Management reserve
Management reserve is added to the cost baseline to form the project budget and is NOT part of the cost baseline itself.
PMI Project Budgeting & Financial Control 3
A project's Schedule Variance (SV) is −$20,000 and Cost Variance (CV) is +$15,000.
Which statement BEST describes the project status?