Project Planning and Monitoring Project Planning and Monitoring Budget & Financial Management

Question 1

What is the purpose of a project budget baseline?

Accepted Answer

To provide an approved time-phased spending plan used to measure and control cost performance

Answer

The cost baseline is the approved, time-phased budget against which actual costs are measured to determine cost variances and performance.

Question 2

What does Earned Value (EV) represent in project financial monitoring?

Accepted Answer

The budgeted value of work actually completed to date

Answer

Earned Value (EV) is the budgeted cost of work performed, representing the value of completed work expressed in monetary terms.

Question 3

If a project's Cost Performance Index (CPI) is 0.85, what does this indicate?

Accepted Answer

The project is over budget, getting only $0.85 of value for every $1.00 spent

Answer

A CPI below 1.0 means the project is over budget — it is receiving less value than the money being spent.

Question 4

What is the difference between a project estimate and a project budget?

Accepted Answer

An estimate predicts costs; a budget is the approved, authorized spending plan

Answer

An estimate is a calculated approximation of costs, while a budget is the formally approved allocation of funds for the project.

Question 5

What is the purpose of management reserve in a project budget?

Accepted Answer

To cover unknown-unknown risks and unforeseen work that is outside the current project scope

Answer

Management reserve is a budget set aside for unknown risks; it is not part of the cost baseline and requires management authorization to use.

Project Planning and Monitoring Practice Test