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Managing Budget and Costs Flashcards

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

Read the first 7 Managing Budget and Costs flashcards as text

  1. A project has spent $400,000 to date with a CPI of 0.80. What was the Earned Value (EV)?

    Answer: $320,000

    CPI = EV / AC → 0.80 = EV / $400,000 → EV = $320,000.

  2. What is the key difference between contingency reserves and management reserves from a budget control perspective?

    Answer: Contingency reserves are in the cost baseline; management reserves are not

    Contingency reserves are part of the cost baseline for known risks, while management reserves sit outside the baseline for unknown unknowns.

  3. A project manager is conducting a cost-benefit analysis. The project costs $200,000 and delivers $350,000 in benefits. What is the benefit-cost ratio (BCR)?

    Answer: 1.75

    BCR = Benefits / Costs = $350,000 / $200,000 = 1.75, indicating the project delivers $1.75 in benefits for every $1 spent.

  4. Which funding limit reconciliation technique adjusts the schedule to accommodate periods when project funding will be constrained?

    Answer: Funding limit reconciliation

    Funding limit reconciliation aligns the planned spending profile with funding constraints, often requiring schedule adjustments.

  5. A project was originally budgeted at $1,000,000. After several approved scope changes, the budget increased to $1,200,000. The current approved budget is known as the:

    Answer: Budget at Completion (BAC)

    The BAC is the total authorized budget for the project, which is updated when approved scope changes alter the cost baseline.

  6. When should the project manager escalate a budget variance to senior management?

    Answer: When the variance exceeds the threshold defined in the cost management plan

    The cost management plan defines escalation thresholds; variances beyond those levels require senior management notification and action.

  7. A risk that was not identified during planning occurs and consumes part of the project budget. Which budget component should be used to fund this unplanned event?

    Answer: Management reserves held above the cost baseline

    Unknown unknowns (unidentified risks) are funded by management reserves, which exist outside the cost baseline specifically for this purpose.