Project Planning and Monitoring Project Planning and Monitoring Budget & Financial Management 2 — Questions and Answers
Question 1: What does the Schedule Performance Index (SPI) measure in earned value analysis?
- The efficiency of schedule progress — how much schedule value is earned per unit of planned schedule (Correct answer)
- The number of days ahead of or behind the project schedule
- The cost per day of schedule slippage
- The percentage of milestones completed on time
Correct answer: The efficiency of schedule progress — how much schedule value is earned per unit of planned schedule
SPI (EV ÷ PV) measures schedule efficiency; a value below 1.0 means less work was accomplished than planned, indicating schedule delays.
Question 2: What is the Estimate at Completion (EAC) formula when the future work is expected to be performed at the budgeted rate?
- EAC = AC + (BAC – EV) (Correct answer)
- EAC = BAC / CPI
- EAC = AC + ETC
- EAC = BAC – EV + AC
Correct answer: EAC = AC + (BAC – EV)
When remaining work is re-estimated at the original planned rate, EAC equals actual costs so far plus the remaining budget (BAC minus EV already earned).
Question 3: What is cost variance (CV) in earned value management?
- The difference between earned value and actual costs, showing whether the project is over or under budget (Correct answer)
- The difference between the original budget and the revised budget
- The total amount spent beyond the approved contingency reserve
- The variance between two different cost estimates for the same work
Correct answer: The difference between earned value and actual costs, showing whether the project is over or under budget
CV = EV – AC; a positive CV means the project is under budget, while a negative CV indicates the project is over budget.
Question 4: What is the primary purpose of a project cost forecast?
- To predict the final cost of the project based on current performance trends (Correct answer)
- To request additional funding from the project sponsor
- To document historical costs for future project planning
- To calculate team member bonuses based on budget performance
Correct answer: To predict the final cost of the project based on current performance trends
A cost forecast uses current performance data and remaining work estimates to project what the project will cost at completion.
Question 5: What is 'funding limit reconciliation' in project cost management?
- Adjusting the schedule of work to match the timing of available project funding (Correct answer)
- Negotiating a higher budget with the project sponsor
- Reconciling actual costs with the approved budget at project close
- Distributing contingency reserve funds to team departments
Correct answer: Adjusting the schedule of work to match the timing of available project funding
Funding limit reconciliation adjusts the schedule so that spending aligns with when authorized funds are actually available, preventing cash flow problems.
Question 6: Which of the following best describes a 'rough order of magnitude' (ROM) estimate?
- A high-level estimate with an accuracy range of approximately -25% to +75% (Correct answer)
- An estimate accurate to within 5% used for contract negotiations
- A detailed bottom-up estimate prepared during project planning
- An estimate based on parametric models with historical data
Correct answer: A high-level estimate with an accuracy range of approximately -25% to +75%
ROM estimates are prepared early with limited information and carry wide accuracy ranges, typically used in project initiation for feasibility decisions.
Project Planning and Monitoring Project Planning and Monitoring Budget & Financial Management 2
What does the Schedule Performance Index (SPI) measure in earned value analysis?