PMP Managing Budget and Costs 4 — Questions and Answers
Question 1: A project is 40% complete, has spent $80,000, and was planned to spend $70,000 for work completed. The BAC is $150,000. What is the Estimate to Complete (ETC) using the formula EAC = AC + (BAC - EV)?
- $90,000 (Correct answer)
- $100,000
- $110,000
- $80,000
Correct answer: $90,000
EV = 40% × $150,000 = $60,000; EAC = $80,000 + ($150,000 - $60,000) = $170,000; ETC = EAC - AC = $170,000 - $80,000 = $90,000.
Question 2: Which cost estimating tool uses expert judgment from multiple specialists who independently provide estimates that are later compiled and reviewed anonymously?
- Monte Carlo simulation
- Delphi technique (Correct answer)
- Analogous estimating
- Reserve analysis
Correct answer: Delphi technique
The Delphi technique collects anonymous expert input through iterative rounds to reach consensus without the influence of group pressure.
Question 3: A project sponsor asks why the project budget is higher than the cost baseline. What is the most likely explanation?
- The project team inflated estimates
- Management reserves are included in the budget but not the cost baseline (Correct answer)
- Contingency reserves were not included in the cost baseline
- The project scope was gold-plated
Correct answer: Management reserves are included in the budget but not the cost baseline
The project budget includes both the cost baseline and management reserves, while management reserves are held outside the cost baseline.
Question 4: During cost control, a project manager identifies a significant variance. At what threshold should variances typically trigger corrective action?
- Any variance from the plan
- Only variances greater than 50%
- Variances beyond defined thresholds established in the cost management plan (Correct answer)
- Only variances reported by team members
Correct answer: Variances beyond defined thresholds established in the cost management plan
The cost management plan defines variance thresholds that trigger corrective action, ensuring focus on significant deviations.
Question 5: Which life-cycle costing concept considers the total cost of ownership, including acquisition, operation, and disposal costs?
- Sunk cost analysis
- Life cycle cost (Correct answer)
- Value engineering
- Cost-benefit analysis
Correct answer: Life cycle cost
Life cycle cost encompasses all costs associated with a deliverable over its entire life, from acquisition through disposal.
Question 6: A project manager wants to accelerate the schedule but has a fixed budget. Which cost technique evaluates the ratio of the cost of an activity to its schedule benefit?
- Reserve analysis
- Cost-duration trade-off
- Crashing (Correct answer)
- Fast tracking
Correct answer: Crashing
Crashing analyzes cost and schedule trade-offs to determine the least-cost way to compress the schedule by adding resources.
Question 7: In earned value management, what does the Planned Value (PV) represent?
- The actual cost of work performed to date
- The value of work actually completed to date
- The authorized budget assigned to scheduled work (Correct answer)
- The estimated cost to complete remaining work
Correct answer: The authorized budget assigned to scheduled work
Planned Value (PV) is the authorized budget assigned to scheduled work, representing what was planned to be accomplished by a point in time.
PMP Managing Budget and Costs 4
A project is 40% complete, has spent $80,000, and was planned to spend $70,000 for work completed.
The BAC is $150,000.
What is the Estimate to Complete (ETC) using the formula EAC = AC + (BAC - EV)?