Project Management Project Cost Management 2 — Questions and Answers
Question 1: A project has a Budget at Completion (BAC) of $200,000, Earned Value (EV) of $80,000, and Actual Cost (AC) of $100,000. What is the Cost Performance Index (CPI)?
- 0.80 (Correct answer)
- 0.75
- 1.25
- 1.20
Correct answer: 0.80
CPI = EV / AC = $80,000 / $100,000 = 0.80, meaning only $0.80 of value is earned for every $1 spent.
Question 2: Which cost estimating technique relies on statistical relationships between historical data and project variables?
- Analogous estimating
- Parametric estimating (Correct answer)
- Bottom-up estimating
- Three-point estimating
Correct answer: Parametric estimating
Parametric estimating uses statistical relationships between historical data and variables like cost per unit or hours per line of code.
Question 3: What does a Schedule Performance Index (SPI) of 1.15 indicate?
- The project is 15% over budget
- The project is ahead of schedule (Correct answer)
- The project is behind schedule
- The project is 15% under budget
Correct answer: The project is ahead of schedule
SPI > 1.0 means more work has been accomplished than planned, so the project is ahead of schedule.
Question 4: A project manager is calculating the Estimate to Complete (ETC) assuming future work will be performed at the planned rate. Which formula applies?
- ETC = EAC - AC
- ETC = (BAC - EV) / CPI
- ETC = BAC - EV (Correct answer)
- ETC = (BAC - EV) / SPI
Correct answer: ETC = BAC - EV
When assuming future work proceeds at the budgeted rate, ETC = BAC - EV (remaining budget minus work already earned).
Question 5: Which process in Project Cost Management establishes how project costs will be estimated, budgeted, managed, monitored, and controlled?
- Determine Budget
- Control Costs
- Estimate Costs
- Plan Cost Management (Correct answer)
Correct answer: Plan Cost Management
Plan Cost Management is the process that establishes the policies and procedures for planning, managing, and controlling project costs.
Question 6: A project's Management Reserve is best described as:
- Funds set aside for identified risks with response plans
- Funds withheld by management for unknown unknowns (Correct answer)
- The difference between EAC and BAC
- The contingency reserve divided by the CPI
Correct answer: Funds withheld by management for unknown unknowns
Management Reserve is budget held by senior management for unforeseen work outside the project scope (unknown unknowns).
Question 7: Which of the following is an input to the Estimate Costs process?
- Cost baseline
- Project schedule (Correct answer)
- Work performance data
- Change requests
Correct answer: Project schedule
The project schedule is an input to Estimate Costs because activity durations affect resource usage and therefore cost estimates.
Project Management Project Cost Management 2
A project has a Budget at Completion (BAC) of $200,000, Earned Value (EV) of $80,000, and Actual Cost (AC) of $100,000.
What is the Cost Performance Index (CPI)?