Specialized Certifications Specialized Certifications Financial Management & Budgeting 2 — Questions and Answers
Question 1: What does the Schedule Performance Index (SPI) measure?
- Efficiency of time utilization on the project (Correct answer)
- The ratio of actual to planned costs
- The number of milestones completed
- The team's productivity rate
Correct answer: Efficiency of time utilization on the project
SPI equals Earned Value divided by Planned Value, measuring how efficiently the project is using its scheduled time.
Question 2: Life-cycle costing in specialized certifications refers to considering costs over:
- The entire useful life of the deliverable (Correct answer)
- Only the project execution phase
- Just the procurement phase
- The first year of operations
Correct answer: The entire useful life of the deliverable
Life-cycle costing accounts for all costs from initiation through disposal, not just project delivery costs.
Question 3: What is the Estimate at Completion (EAC) formula when current variances are expected to continue?
- BAC / CPI (Correct answer)
- BAC - EV + AC
- AC + ETC
- PV + EV
Correct answer: BAC / CPI
When current cost performance is expected to continue, EAC equals Budget at Completion divided by the Cost Performance Index.
Question 4: Which procurement contract type places the most financial risk on the buyer?
- Cost-plus-fixed-fee (CPFF) (Correct answer)
- Firm fixed price (FFP)
- Fixed price with incentive fee (FPIF)
- Time and material (T&M)
Correct answer: Cost-plus-fixed-fee (CPFF)
In CPFF contracts, the buyer reimburses all allowable costs plus a fixed fee, bearing the risk if costs escalate.
Question 5: A budget variance (BV) of -$10,000 means:
- The project has spent $10,000 more than earned (Correct answer)
- The project has earned $10,000 more than spent
- The project is $10,000 ahead of schedule
- The project saved $10,000
Correct answer: The project has spent $10,000 more than earned
A negative budget variance (EV - AC) means actual costs exceed earned value, signaling cost overrun.
Question 6: What is the purpose of a funding limit reconciliation?
- To align expenditure with organizational fund release schedules (Correct answer)
- To balance the project budget with team salaries
- To audit vendor invoices
- To calculate final project ROI
Correct answer: To align expenditure with organizational fund release schedules
Funding limit reconciliation ensures that spending plans align with the periodic release of funds by the organization.
Specialized Certifications Specialized Certifications Financial Management & Budgeting 2
What does the Schedule Performance Index (SPI) measure?