PMP Managing Budget and Costs 2

Question 1

A project has a BAC of $500,000, EV of $200,000, and AC of $250,000. What is the Cost Performance Index (CPI)?

Accepted Answer

0.80

Answer

CPI = EV / AC = $200,000 / $250,000 = 0.80, meaning only $0.80 of value is earned for every $1 spent.

Question 2

Which cost estimation technique uses statistical relationships between historical data and project variables to calculate cost estimates?

Accepted Answer

Parametric estimating

Answer

Parametric estimating uses statistical relationships (e.g., cost per unit) derived from historical data to calculate estimates.

Question 3

A project manager notices the CPI has been consistently 0.75 for the past three months. What is the most likely Estimate at Completion (EAC)?

Accepted Answer

EAC = BAC / CPI

Answer

When the CPI is expected to remain the same, EAC = BAC / CPI is the most appropriate formula.

Question 4

What does a negative Cost Variance (CV) indicate about a project?

Accepted Answer

The project is over budget

Answer

A negative CV (EV - AC < 0) means actual costs exceed earned value, indicating the project is over budget.

Question 5

A project manager is asked to provide a rough order of magnitude (ROM) estimate. What is the typical accuracy range for a ROM estimate?

Accepted Answer

-25% to +75%

Answer

ROM estimates are typically accurate within -25% to +75% and are used in the early phases of a project.

PMP - Project Management Professional Practice Test