Project Planning and Monitoring Budget & Cost Control 2 — Questions and Answers
Question 1: What is the primary purpose of a project cost baseline?
- To measure and monitor cost performance over time (Correct answer)
- To list all project deliverables
- To assign responsibilities to team members
- To record actual expenditures only
Correct answer: To measure and monitor cost performance over time
The cost baseline is a time-phased budget used to compare against actual costs and track project performance.
Question 2: Which method estimates project costs by using historical data from similar past projects?
- Analogous estimating (Correct answer)
- Parametric estimating
- Bottom-up estimating
- Three-point estimating
Correct answer: Analogous estimating
Analogous estimating uses actual costs from previous similar projects as a basis for estimating the current project.
Question 3: A project manager notices the actual cost is consistently higher than planned. What is the best immediate action?
- Perform a root-cause analysis and implement corrective actions (Correct answer)
- Increase the project budget immediately
- Reduce project scope to cut costs
- Report the variance but take no action
Correct answer: Perform a root-cause analysis and implement corrective actions
Identifying the root cause of cost overruns allows the project manager to implement targeted corrective actions before deficits worsen.
Question 4: What does the Estimate to Complete (ETC) represent?
- The expected cost to finish the remaining project work (Correct answer)
- The total original budget for the project
- The difference between planned and actual costs
- The cost of completed work so far
Correct answer: The expected cost to finish the remaining project work
ETC is the projected cost of completing all remaining project work from the current point forward.
Question 5: Which document formally authorizes project spending and defines cost thresholds?
- Project charter (Correct answer)
- Work breakdown structure
- Risk register
- Responsibility assignment matrix
Correct answer: Project charter
The project charter authorizes the project and often establishes high-level budget limits and spending authority.
Question 6: In earned value management, what does a Schedule Performance Index (SPI) of 1.2 indicate?
- The project is progressing faster than planned (Correct answer)
- The project is behind schedule
- The project is over budget
- The project has completed 120% of its scope
Correct answer: The project is progressing faster than planned
An SPI above 1.0 means the team has completed more work than was scheduled for this point, indicating ahead-of-schedule performance.
Project Planning and Monitoring Budget & Cost Control 2
What is the primary purpose of a project cost baseline?