Chapter Cost

Question 1

During project planning, one of the electrical engineers informs the project manager that the life cycle
cost of the new heating and air conditioning system is higher than the life cycle cost of another heating
and air conditioning system. What should the project manager do?

A. Select the product with the best life cycle cost to earned value ratio.
B. Select the product with the lowest maintenance cost to life cycle cost ratio.
C. Select the product with the lower life cycle cost.
D. Determine if there is room in the project budget for the additional costs.

Answer 1

The correct answer is C.

The best practice is to choose the product with the lower life cycle cost.

Question 2

You are in the middle of project executing and find you are running out of money due to unanticipated
changes. What is the BEST thing to do?

A. Reevaluate the risk analysis and contingency funding.
B. Use resources that do not charge against the project.
C. Crash or fast track the project.
D. Ask for a change to the project budget.

Answer 2

The correct answer is A.

Question 3

What would be the best explanation for the following: Both the cost variance and schedule variance are negative, but the cost
variance is lower than the schedule variance.

A. The project activities took longer than expected, but costs were lower.
B. The project underspent because all work was not completed, but overspent for worx that was
done.
C. The project underspent, because costs were lower than planned and activities were easier to
complete than planned.
D. The project overspent due to increased costs and yet completed some activities faster.

Answer 3

The correct answer is B.

Question 4

Which of the following is a KEY way to improve activity cost estimates?

A. Base activity estimates on the upper and lower control limits.
B. Let the project manager create the activity cost estimates.
C. Let management create the management reserve and the activity cost estimates.
D. Use historical data.

Answer 4

The correct answer is D.

Question 5

While completing a project, a project manager realizes he needs to decrease project costs. After
researching his options, he comes up with the following options. Which choice would DECREASE project
costs?

A. Change activity A to be completed by resource B instead of resource C. Resource B is a more
experienced worker.
B. Remove a test from the project management plan.
C. Move activities B and H to occur concurrently, and accept a 30 percent increase in the risk that five
more resources will be needed later.
D. Change to component A from component B. Component A costs more to purchase, but has a lower
life cycle cost than B.

Answer 5

The correct answer is B.

Question 6

The success of your new project requires several of your people to work in a foreign country for six
months. The team informs you that in this country a payment is required to obtain visas. What should
you do?

A. Do not pay and see what happens.
B. Include the payment in the project budget.
C. Cancel the project.
D. Do not send your people.

Answer 6

The correct answer is B.

Question 7

Project setup costs are an example of:
A. Variable costs.
B. Overhead costs.
C. Opportunity costs.
D. Fixed costs.

Answer 7

The correct answer is D.

Question 8

You are tracking your project using earned value management (EVM) and find you are behind schedule
but under budget. Your variances show schedule variance (SV ) = -us $50 million, cost variance (CV) =
$100 million, and your actual costs are us $500 million. What are the CPI, PV, and SPI?

A. 0.92, $550 million, 1.20
B. 1.20, -$100 million, 0.92
C. 0.92, $650 million, 1.08
D. 1.20, $650 million, 0.92

Answer 8

The correct answer is D.

Question 9

Payment for any decision made or encouraged by a foreign official with respect to whether a company will
be awarded a project is BEST described as:

A. A progress fee.
B. A sunk cost.
C. A bribe.
D. A common practice.

Answer 9

The correct answer is C.

Question 10

After analyzing the status of your project, you determine the earned value (EV) is lower than the
planned value (PV). What should you expect as an outcome if this trend continues?

A. The project will finish below the original cost estimate.
B. The estimate at completion will be lower than planned.
C. The actual cost will be lower than planned.
D. The project will finish behind schedule.

Answer 10

The correct answer is D.

Question 11

A project manager is working with management to create the project estimate. During the initiating
process group, what level of accuracy should the estimate have?

A. -35 percent to +75 percent
B. - 1O percent to +1O percent
C. -25 percent to +75 percent
D. -1 o percent to +25 percent

Answer 11

The correct answer is C.

Question 12

Your assistant project manager does the monthly earned value management (EVM) analysis, but falls ill
before completing it. She has provided you with the following information: cost performance index (CPI)
= 1.10, actual cost (AC)= US $800 million, planned value (PV) = US $890 million. How is the project
going?

A. You have no real concerns about either schedule or budget.
B. Both the schedule and the budget are better than planned.
C. There is enough money to support an offsite team outing.
D. The schedule is behind by 10 days.

Answer 12

The correct answer is A.

Question 13

While reviewing project performance, the project manager determines that the schedule variance is -
soo. What is the BEST thing to do?
A. Determine the cost variance.
B. Look for activities that can be done in parallel.
C. Let the sponsor know.
D. Move resources from the project to one that is not failing.

Answer 13

The correct answer is A.

Question 14

You have always been asked by your management to cut your project cost estimates by 10 percent
after you submitted them. The scope of your new project is unclear and there are over 30 stakeholders.
Management expects a 25 percent reduction in downtime as a result of the project. Which of the
following is the BEST course of action in this situation?
A. Replan to achieve a 35 percent improvement in downtime.
B. Meet with the team to identify where you can find 10 percent savings.
C. Reduce the estimate and note the change in the risk response plan.
D. Provide an accurate estimate of the actual costs and be able to support your estimate.

Answer 14

The correct answer is D.

Question 15

Your cost forecast shows you will have a cost overrun at the end of the project. Which of the following should you do?

A. Eliminate risks in estimates and reestimate.
B. Decrease scope.
C. Meet wítll the sponsor to find out what worl< can be done sooner.
D. Cut quality.

Answer 15

The correct answer is A.

Question 16

Although the stakeholders thought there was enough money in the budget, halfway through the project
the cost performance index (CPI) is 0.7. To determine the root cause, several stakeholders audit the
project and discover the project cost budget was estimated analogously. Although the activity estimates
add up to the project estimate, the stakeholders think something was missing in how the estimate was
completed. Which of the following describes what was missing?

A. Past history was not taken into account.
B. Bottom-up estimating should have been used.
C. SPI should be used, not CPI.
D. Estimated costs should be used to measure CPI.

Answer 16

The correct answer is B.

Question 17

A cost performance index (CPI) of 0.89 means:

A. At this time, we expect the total project to cost 89 percent more than planned.
B. When the project is completed, we will have spent 89 percent more than planned.
C. The project is progressing at 89 percent of the rate planned.
D. The project is getting 89 cents out of every dollar invested.

Answer 17

The correct answer is D.

Question 18

You are managing a new oil purification project in a foreign country. A person informs you that you will
have to pay him a “transfer fee” for the permit to move heavy equipment through the city. What is the
FIRST thing you should do?
A. Pay the fee, but only to the city.
B. Do not pay the fee.
C. Make sure the person is really a government official.
D. Negotiate openly with the city officials.

Answer 18

The correct answer is C.

Question 19

Analogous estimating:
A. Calculates estimates using actual detailed historical costs.
B. Is used most frequently during project executing.
C. Uses top-down estimating techniques.
D. Uses bottom-up estimating techniques.

Answer 19

The correct answer is C.

Question 20

A manager has responsibility for a project that has the support of a senior manager. From the
beginning, you have disagreed with the manager as to how the project should proceed and what the
deliverables should be. You and she have disagreed over many issues in the past. Your department has
been tasked with providing some key work packages for the project. What should you do?

A. Ask to be removed from the project.
B. Provide the manager with what she needs.
C. Sit down with the manager at the beginning of the project, attempt to describe why you object to
the project, and discover a way to solve the problem.
D. Inform your manager of your concerns to get her support.

Answer 20

The correct answer is B.