Engage Stakeholders and Manage Budgets and Resources 3 Flashcards
What is one of the consequences of Agile being heavily focused on regular stakeholder engagement?
A. Communication overhead
B. Difficulty understanding total scope, schedule, and cost
C. Acquainting new stakeholders with the project
D. Revisiting the team charter process
Answer: A
Process - Task 4 - Engage Stakeholders
Option A is correct. Communication overhead (the amount of time communicating with various stakeholders) is high within agile and therefore is considered one of the consequences of agile.
Susan has just been appointed as the project manager for a software project and realizes that no WBS has been created and the project is entering the construction phase. What should she do?
A. She should report this to senior management and start work on the construction phase
B. She should get details from WBS Dictionary to create the WBS
C. The WBS should be created first and then construction work started
D. She should refuse to manage the project without a WBS
Answer: C
Process - Task 5 - Manage Budget and Resources
The problem here is that the WBS had not been prepared. The correct choice C states that she should first create a WBS and then start the construction phase. Choice A talks about reporting the matter to senior management but that does not solve the problem. Choice B talks about finding information from the WBS Dictionary, but the WBS dictionary is dependent on the WBS. Choice D is also wrong as it talks about refusing to manage the project, which does not solve the problem. Moreover, the role of project manager is one of a proactive problem solver. Finally, while we may have preferred an answer such as allow preliminary construction to occur while simultaneously creating the WBS
As you begin to consolidate your cost estimates, you notice a group of risks in the risk register that have just been updated with newly approved response plans. You decide it is important before finalizing the overall budget to consider adding some kind of reserve to address these and other project risks. Contingency reserves are added to the budget in order to cover which of the following?
A. Indirect Costs
B. Unforeseeable events such as lightning strikes
C. Direct Costs
D. Uncertain events which are known to be possible occurrences
Answer: D
Process - Task 5 - Manage Budget and Resources
Contingency reserves are used to cover “known unknowns,” such as a hurricane in Florida during hurricane season. Management reserves, which are not part of the cost performance baseline, would cover the type of “unforeseeable unknowns” described in Answer B.
You are a project manager for a large health care company. You are working through various estimating techniques. Which of the following is true regarding analogous estimating?
A. It uses bottom-up estimating techniques
B. It is used most frequently during the monitoring and controlling of the project
C. It uses top-down estimating techniques
D. It uses definitive estimating techniques
Answer: C
Process - Task 5 - Manage Budget and Resources
Analogous estimating is also known as top-down estimating, thus answer C is correct and answer A is incorrect. It is used most frequently during the planning processes to derive estimates which will form the basis for the budget and schedule.
You are a project manager leading a large project for a transportation organization. Past projects have had significant cost over runs and schedule delays. You are under a lot of pressure to accurately report your performance metrics. You have had some minor variances but they are not anticipated to occur in the future. You project has the following EVM metrics: BAC =200; AC =120 ; EV =80 ; CPI =0.666. What is your estimate at the completion of the project?
A. 120
B. 160
C. 200
D. 240
Answer: D
Process - Task 5 - Manage Budget and Resources
The EAC formula to employ when variances are atypical is: AC + (BAC-EV). Solved, that is: 120 + (200-80) = 240.
You are the project manager for a large solar energy company. Since the company is new, cost containment is critical to the success of your project. You have new team members that were recently hired completing the cost estimating process. You want to ensure estimates are as accurate as possible. All the following are tools and techniques of Estimate Costs except which one?
A. Cost aggregation
B. Analogous estimating
C. Bottom-up estimating
D. Parametric estimating
Answer: A
Process - Task 5 - Manage Budget and Resources
The tools and techniques of the Estimate Costs process are expert judgment, analogous estimating, parametric estimating, bottom-up estimating, three point estimates, reserve analysis, cost of quality, project management estimating software, vendor bid analysis, and group decision making techniques. Cost aggregation is a tool and technique of the Determine Budget process (where all estimates are added up to form a total).
You are managing a project for a major construction company. You have an approved statement of work, an approved project charter and understand the project objectives. What is the next thing you should do?
A. Meet with prior project managers to research if previous projects exist which are similar to yours
B. Identify stakeholders to understand who will be impacted by this project
C. Begin collect requirements from stakeholders
D. Get approval on the schedule baseline
Answer: B
Process - Task 4 - Engage Stakeholders
Once a charter is approved, the next step should be to look at any stakeholders impacted by this project. You will not be able to collect requirements until stakeholders are identified. It is also too early in the process to have a schedule baseline, which will be developed during planning.
One method to determine how well a project is performing at a specific point in time is by using which of the following?
A. Critical Path Method
B. Historical data
C. Expert judgment
D. Cost Performance Index (CPI)
Answer: D
Process - Task 5 - Manage Budget and Resources
The cost performance index divides the earned value by the actual cost of the project. For the CPI calculations, a project with a CPI value greater than 1 signifies that your project is running under budget, while a CPI below 1 shows the project is over budget. CPI is the most important earned value management indicator.
During a meeting with the Project Management Team, you are discussing expenditures for the project. Your current CPI is 1.76 and your SPI is 2.58 with a TCPI of .67. For IM/IT purchases, there is a separate line of accounting. Where would you look for this information?
A. Chart of Accounts
B. Code of Accounts
C. Control Accounts
D. WBS
Answer: A
Process - Task 5 - Manage Budget and Resources
The chart of Accounts is a list detailing all accounts used by the organization to identify areas of expenditures and is not part of the WBS itself. The code of accounts is the numbering scheme used to uniquely identify each component of the WBS. A control account is a management control point where scope, budget, actual cost, and schedule are integrated and compared to earned value as an assessment of the health of the project.
The __ of Accounts is a list detailing all accounts used by the organization to identify areas of expenditures and is not part of the WBS itself.
The chart of Accounts is a list detailing all accounts used by the organization to identify areas of expenditures and is not part of the WBS itself.
The __ of accounts is the numbering scheme used to uniquely identify each component of the WBS.
The code of accounts is the numbering scheme used to uniquely identify each component of the WBS.
A __ account is a management control point where scope, budget, actual cost, and schedule are integrated and compared to earned value as an assessment of the health of the project.
A control account is a management control point where scope, budget, actual cost, and schedule are integrated and compared to earned value as an assessment of the health of the project.
During a discussion with the sponsor, the importance of developing a cost management plan arises. The Sponsor recommends doing an abbreviated plan since your team typically delivers on or under budget. Due to the length of time you have been with this team and the sponsor, you take her advice and use an abbreviated plan to move forward with the project. What should happen next?
A. An abbreviated plan could be developed using past projects, lessons learned and analogous estimating
B. Since you know the sponsor does not use follow up plans, agree with them and create a detailed plan in accordance with the PMBOK Guide, 6th edition
C. Determine tailoring options, identify assumptions, as well as update the risk register to accommodate any threats prior to using configuration management
D. Inform the sponsor of the dangers of abbreviating a plan and all projects should have detailed plans to support success
Answer: C
Process - Task 5 - Manage Budget and Resources
The project management plan or any component of it can be summarized or detailed. The scope statement is the only document that should always be detailed. Answer B is wrong, because even though due diligence is still required, the PMBOK Guide does not require detailed documents. C is a better answer than A, because it provides specifics about how to proceed.
You started managing a new project to implement customized software on over 5,000 laptops throughout your organization. The project charter has been signed and you are ready to go. What is the first thing you should do?
A. Meet with your project team to determine the best way to handle the key stakeholders.
B. Prioritize requirements from the key stakeholders.
C. Meet with stakeholders to understand their needs and interest in the project using the Stakeholder Engagement Assessment Matrix.
D. Perform an analysis of the interest, power and influence of project stakeholders using either the Stakeholder Grid, Stakeholder Cube or Salience Model tools.
Answer: D
Process - Task 4 - Engage Stakeholders
Choices A and B are both good things to do, but these would not be the first thing. At this initial stage of the project, you want to understand the needs and interest of project stakeholders (their power/influence, impact/interest and perhaps whether they are for or against your project). You would not use the Stakeholder Engagement Assessment Matrix (Choice C) yet because this assesses their engagement level, which is performed after an initial analysis. Choice D is the best answer; You first need to perform a stakeholder analysis using one of the three tools listed - Stakeholder grid, Stakeholder cube or Salience model.
Activity A is planned to cost $200, is 100% complete, and actually cost $200. Activity B is planned to cost $75, is 90% complete, and actually cost $120 so far. Activity C is planned to cost $200, is 75% complete, and has cost $175 so far. The total budget is $1000. What is the schedule variance for the activities listed?
A. ($77.50)
B. ($57.50)
C. 0.84
D. 0.88
Answer: B
Process - Task 5 - Manage Budget and Resources
To calculate this, the earned value (EV) and planned value (PV) need to be calculated first. To do this, multiply the percent complete of each activity by its planned value (PV). That will provide the EV for each activity. Add the earned value of each activity to determine the total earned value. Add the planned value of each activity (to date) to determine the total planned value. The planned value of $475.00 is then subtracted from the earned value of $417.50. This provides a SV of -$57.50. This means that the project is $57.50 behind schedule.
You are managing a project for a large financial industry firm. So far you have been receiving praise for the progress of your project and your stakeholders are engaged and enthusiastic. You have been utilizing different methods to evaluate and report on the progress of your project. However you have been told at Acme bank EVM is used to track and estimate cost and schedule. You have completed your schedule variance calculations and are now looking at cost information. You know that BAC = 500, PV = 325, AC = 275, and EV = 250 and that you are experiencing typical variances. What is ETC?
A. 227.3
B. 250
C. 275
D. 525
Answer: C
Process - Task 5 - Manage Budget and Resources
To calculate ETC, you must first calculate EAC and then subtract AC from that. Because variances are typical and will continue, you must use the BAC/CPI formula to calculate EAC, and must therefore calculate CPI first. CPI = EV / AC, so 250 / 275 = CPI of .909. You can now calculate EAC: 500/.909 = 550.05. Now that we know EAC is 550.05, we can subtract AC of 275 to get our ETC of 275.05. On the exam, you could get answer choices that are rounded slightly. Do not round your own calculations – use the precise numbers. Then, if the answer choices are not given precisely, choose the one that represents the rounded figure you derived from your calculations.
You are a project manager and currently working with your team on documenting estimates. You have completed Rough Order of Magnitude estimates. Which of the following must exist in order to complete a definitive cost estimate?
Answer: B
Process - Task 5 - Manage Budget and Resources
The scope baseline is needed in order to create a definitive cost estimate. The scope baseline includes the Scope statement, WBS and WBS dictionary. Choices A, C, and D are not required to complete a definitive estimate.
Everest company commonly uses the Sum of Years method to calculate depreciation on assets. They purchased a computer, which cost $15,000, knowing they can sell it at the end of three years for $3,000. How much depreciation is taken the third year?
A. $4,000
B. $2,000
C. $7,500
D. $2,500
Answer: B
Process - Task 5 - Manage Budget and Resources
The depreciated cost is 15,000 - 3,000 = 12,000. Sum of years = 3 + 2 + 1 = 6, so in the first year, the depreciation will be 3 / 6, second year will be 2 / 6, and third year will be 1 / 6. Thus, 12,000 * (1 / 6) = 2,000.
You are participating in a new project charter development for a project with a very tight delivery timeline. You most likely will need to hire additional resources to get this project done on time, which will impact the budget. The sponsor is asking for a general idea on how much this is going cost, in order to expedite budget approval. He would like this estimate to be documented on the project charter. What is your best option?
A. Use historical data and provide an analogous estimate, then document that amount on the project charter
B. Use historical data and provide a parametric estimate, then document that amount on the project charter
C. Insist detailed cost estimates need to be completed before you are willing to provide an estimate for the charter
D. Provide an estimate based on your past project management experience, but do not document it on the project charter, as you do not want to be liable for this estimate
Answer: A
Process - Task 5 - Manage Budget and Resources
During project charter development, detailed estimating is not known. Due to time constraints and needing an estimated budget up front, analogous estimating should be used. This uses historical data and provides an approximate figure. Parametric estimating (Choice B) involves some type of statistical relationship, which is not mentioned here. Detailed cost estimates (Choice C) will not be done until later in the project process. At this point, we do not even know if project funding will be approved, so this project may never be activated. While past experience may help with the analogous estimating (Choice D), refusing to document is on the charter is not an option since it has been requested by the sponsor.
You are the project manager for a mid-size construction company. You have been reviewing previous project plans and lessons learned to get an idea regarding estimating for your project. Which estimating method would use the metric of $1,400 per metric tonne as part of the estimate?
A. Top-down estimation
B. Parametric estimation
C. Bottom-up estimation
D. Analogous estimation
Answer: B
Process - Task 5 - Manage Budget and Resources
This is an example of parametric estimating, as the $1,400 per metric tonne represents a parameter that could predict the cost of the resource based on the number of metric tons needed.
You are the project manager for a large technology company. You are working on a project to significantly improve the functionality of your lap top computer. Margins are razor thin, and so cost control is critical to the success of your project. In fact, you are replacing a project manager that consistently delivered projects over budget. You want to ensure that your project budget is accurate and achievable. All of the following are inputs to the Determine Budget process except which one?
A. Activity cost estimates
B. Scope baseline
C. Resource calendar
D. Reserve analysis
Answer: D
Process - Task 5 - Manage Budget and Resources
The inputs to the Determine Budget process are cost management plan, activity cost estimates, basis of estimates, scope baseline, project schedule, resource calendars, risk register, agreements, and organizational process assets. Reserve analysis is a tool and technique of this process.
As a project manager, you realize that stakeholder engagement is critical to overall project success. You have done a great job including your entire team in identifying stakeholders and are confident your prioritization criteria has been effective. As stakeholders engage with the project, the overall effectiveness of the stakeholder engagement strategy can be evaluated. As the project manager, this means you should do which of the following?
A. Publish the stakeholder engagement assessment matrix
B. Publish the stakeholder cube
C. Update the project management plan
D. Distribute the stakeholder engagement plan
Answer: C
Process - Task 4 - Engage Stakeholders
If there are changes to the stakeholder engagement strategies, as an output of the Monitor Stakeholder Engagement process, affected sections of the project management plan are updated because of these changes. These updates could be with any of the plans in the project management plan. Since the stakeholders seem to be engaging well, the only impact would be updates to other elements of the project management plan. Publishing or distributing stakeholder information such as the plan or the stakeholder cube is rarely, if ever, done.
In conducting a performance review of your project, you realize that you need to issue a change request which could result in the adjustment of a project baseline. Which process are you most likely performing?
A. Control Costs
B. Ensure Scope
C. Define Scope
D. Collect Requirements
Answer: A
Process - Task 5 - Manage Budget and Resources
During the Control Costs process, you may need to adjust the cost performance baseline (budget) in order to complete the work as planned. In cases where additional funding is not possible, you may need to reduce the scope baseline to eliminate some of the work items which cannot be funded.
You are the project manager on a large construction project. Your organization is very cost conscience and you can not go over budget. Your sponsor is risk averse and you can not delay the implementation of your project. Which of the following describes how cost variances will be managed?
A. Cost management plan
B. Cost baseline
C. Cost estimate
D. Project Management Plan
Answer: A
Process - Task 5 - Manage Budget and Resources
The Cost Management Plan sets out the format and establishes the activities and criteria for planning, structuring, and controlling the project costs. The Cost Management Plan is a subsidiary plan of the Project Management Plan. It is an output of the Plan Cost Management process.
You are the project manager for the Regional Railroad project. The project is to build a railroad linking the east side of your city with the downtown area. Part of the project will be to remodel the existing downtown train station. You are preparing a review of the current project performance and have the following measurements: PV = 250, AC = 350, EV = 300. What do you know about this project?
A. SV is a positive number which means you have completed more work than you had planned to date.
B. SV is a positive number, which means you are under budget.
C. SV is a negative number which means the project is ahead of schedule.
D. ETC is a positive number, which means the project will finish over budget.
Answer: A
Process - Task 5 - Manage Budget and Resources
SV is a positive number and is calculated as EV - PV which is 300 - 250 = 50. A positive SV means that the project is ahead of schedule, meaning you have completed more work to date than planned. It does not mean you are under budget, however.
You are a project manager responsible for multiple facilities-based projects with a large telecommunications company. One of your projects has a BAC of $250,000. You have calculated your CPI to be .91 and your AC to be $175,000. Assuming the variances are likely to continue, what is the EAC of the project?
A. $25,000
B. $15,750
C. $265,000
D. $274,725
Answer: D
Process - Task 5 - Manage Budget and Resources
Since there is only enough information to calculate for the cost variances, the correct equation would be BAC/CPI, or 250,000 / 0.91 = $274,725.
What is your SPI if EV = 8 and PV = 6?
A. 1.33
B. 0.66
C. 1
D. 0.75
Answer: A
Process - Task 5 - Manage Budget and Resources
SPI= EV/PV. Here, that works out to 8/6, which is 1.33.
You are reviewing your project organization and what potential contractors you need and when. Your project requires an electrician at week three. This is an example of which of the following?
A. Organizational interfaces
B. Resource requirements
C. Contractor requirements
D. Resource constraints
Answer: B
Process - Task 5 - Manage Budget and Resources
Because the project requires the electrician, a project role, this is a resource requirement. Resource requirements identify the types and quantities of resources required for each activity in the work package.
The cost estimate of a proposed project carries an expected value of $1,000,000 and a standard deviation of $50,000. The project is budgeted for $1,100,000 to include a contingency reserve. Assuming that the cost estimates are normally distributed, what is the probability of completing this project over budget?
A. 10%
B. 5%
C. 2.25%
D. 50%
Answer: C
Process - Task 5 - Manage Budget and Resources
Mean = 1,000,000. S.D. = 50,000. 1,100,000 = Mean + 2 * S.D. (1,000,000 + 2*50,000). The question asks the probability of completing the project over budget. Therefore we must look at the area remaining outside of the 2 S.D. limits. The area under the curve for 2 S.D’s = 95.46% or about 95.5%. So the area outside this is 4.5%. Since we are only interested in “over budget”, we must only consider the area outside the curve to the right of the mean i.e. only half the area (the other half, on the left side of the mean, pertains to being under budget). Therefore 4.5% / 2 = 2.25%
Our potential customer, Jack, is concerned that the agile methodology your company wants to use will not work due to the fixed budgetary constraints he has for the project. You discuss an option with Jack that will allow his organization to change the scope of the project at predetermined points. This will allow your customers to adjust features to fit budget capacity. What option is being discussed?
A. Dynamic scope option
B. Early Cancelation option
C. Not-to-exceed time and materials
D. Force majeure situations that need to be included in Management Reserves for the project
Answer: A
Process - Task 5 - Manage Budget and Resources
Agile projects can exist in an environment with strict budgetary requirements but it will affect the project scope and schedule this should be communicated early in the project. In this case, the “options” listed are all described in the Agile Practice Guide p 78.
Which of the following best describes the concept of aggressive transparency?
A. Inviting stakeholders to meetings and reviews, and posting project artifacts to public sites.
B. Sharing the details of the stakeholder register with all stakeholders.
C. It is a conflict resolution technique.
D. It is a performance evaluation technique.
Answer: A
Process - Task 4 - Engage Stakeholders
The intent is to resolve as quickly as possible any misalignment, dependency or other issues relating to the changing Agile project. Answer B isn’t recommended since not all stakeholders will be receptive to seeing how they have been classified (share stakeholder register on a need-to-know basis only).
You are the project manager for a large construction company. Your current project is to rebuild a bridge on a major freeway. Your project team is asked to provide an extremely accurate cost estimate for a construction project. How should you proceed?
A. Take the cost of raw materials and labor for each activity in the WBS. Check previous project files and consider any risks to delivery; then add 10% to account for the company profit.
B. Add up raw materials and labor costs for each activity that must be done.
C. Use a rule of thumb, like cost per square foot.
D. Use the cost of raw materials from a similar project on a house with the same floor plan and make adjustments for known differences.
Answer: B
Process - Task 5 - Manage Budget and Resources
The most accurate method is bottom-up estimating, which is what choice B describes. Choice C is describing parametric estimating and choice D is describing analogous estimating. Both are quick methods to estimate, but are not very accurate.
You are in a supportive PMO and giving a class on Earned Value Management. The concept is difficult for some of your junior project managers to grasp. You have explained EV, PV and AC and are currently discussing schedule variance (SV) and schedule performance index. A schedule performance index (SPI) of 0.76 means which of the following, and what can you expect of your schedule variance?
A. You are over budget and SV > 0
B. You are ahead of schedule and SV > 0
C. You are behind schedule and SV < 0
D. You are only progressing at 24 percent of the rate originally planned and SV < 0
Answer: C
Process - Task 5 - Manage Budget and Resources
An SPI greater than 1 means that you are ahead of schedule, but an SPI less than 1 means that you are behind schedule.
You have received new information about future resource costs that might cause you to exceed your control account budget. As the PM of this project, what would you do first?
A. Report this in a variance analysis
B. Provide a revised EAC in the next scheduled EAC report
C. Try not to exceed the control account BAC
D. Analyze the new information and the remaining work to determine next steps
Answer: D
Process - Task 5 - Manage Budget and Resources
Remember that analysis is always done before taking any further action.
Which of these represents the range of a rough order of magnitude (ROM) estimate if the base point is $100,000?
A. $90,000 to $110,000
B. $75,000 to $125,000
C. $75,000 to $175,000
D. $10,000 to $190,000
Answer: C
Process - Task 5 - Manage Budget and Resources
According to the PMBOK Guide 6th edition, page 241, a rough order of magnitude (ROM) is a range of -25% to + 75%.
Franklin, a project manager, is preparing his project budget. The executive office has just published the annual funding available to execute key projects in the corporate portfolio. Knowing there are funding allocation considerations, which of the following should not be included in the project budget?
A. Reserves
B. Budgetary cycle
C. Extra costs for potential risks
D. Monthly lease for the organization’s headquarters
Answer: D
Process - Task 5 - Manage Budget and Resources
D is an example of overhead costs not attributable to a specific project, and thus, such costs should not be considered when preparing the project budget.
Your organization is implementing Agile methods for the first time and Senior Management is excited about the prospect of regular incremental delivery. You have been assigned the Team Facilitator for a new IT implementation and are in a meeting with stakeholders to discuss the new approach. One of the stakeholders, John states, "I do not see the purpose of this. This is nonsense". Jane states, "Ok whatever, I do not care. Do you actually need anything from me?" How would you best classify John and Jane on the Stakeholder Engagement Assessment Matrix?
A. John is Resistant and Jane is Supportive
B. John is Resistant and Jane is Resistant
C. John is Neutral and Jane is Supportive
D. John is Resistant and Jane is Neutral
Answer: D
Process - Task 4 - Engage Stakeholders
Since John is questioning the purpose of the new system, he would be resistant. Since Jane states she does not care, then she would be neutral - she is indifferent about whether the project is a success or failure. She is not supportive, even though she has asked if we need anything from her, but this is following her, I do not care comment, so her tone here would imply that she is not particularly fond of the project, nor is she resistant to the project. PMI Authorized PMP Exam Prep Student Guide/ Page 173
To maximize the likelihood of meeting financial objectives, you want to ensure that you can personally control the timing of key spending for your project to optimize cash flow throughout the next phase, but this may not always be possible. The project manager can have control over which of the following costs?
A. Strategic
B. Tactical
C. Direct
D. Indirect
Answer: C
Process - Task 5 - Manage Budget and Resources
Costs that are directly incurred because the project is being executed are directs costs. In some cases, the project manager has control over the costs, and in others, the organization itself will control the costs. In any case, the costs occur only when the project is ongoing. Strategic and Tactical are not cost-related PMBOK terminology.
While managing your projects your organization has gone through some significant changes. Specifically, there are some new senior managers in your department and several employees have left the firm. Your first step should be to do what?
A. Read the charter to make sure none of the changes impact it
B. Update the risk register
C. Identify stakeholders
D. Modify the communications management plan
Answer: C
Process - Task 4 - Engage Stakeholders
Any time there is a significant change in the organization, you should try to identify new stakeholders and find out if any of the previous ones have left the firm or the project. It may well be necessary to do A, B and D but the question asks what to do first.
As a Project Manager, you are halfway through your 13-month IT Infrastructure upgrade, and are about to embark on the next major implementation phase. Per the Cost Management Plan, the culture of your company prefers that you use rolling wave planning to estimate costs at a level better than a rough order of magnitude. These estimates must occur at least one month before for the next phase to allow time for any executive overview and approval of a baseline change. As you are preparing your phase-specific cost estimates, you notice that you had neglected to account for heating and electricity expenses in your numbers. These are examples of which kind of costs?
A. Secondary
B. Primary
C. Direct
D. Indirect
Answer: D
Process - Task 5 - Manage Budget and Resources
The costs of heating are not controllable by the project manager and do not vary based on project activities. This makes them indirect costs. Secondary and Primary costs are fictitious terms. An example of direct costs would be material acquisitions as they are attributable to controlled purchases (traced directly to a cost with a receipt).
You are the project manager for a medium sized national consulting firm. Senior management wants to estimate the costs of a project but doesn’t want to spend a lot of time on a detailed analysis. What option do you suggest?
A. Use a beta, or weighted average estimate
B. Use bottom-up estimating since it is a small project
C. Use design of experiments
D. Use the cost of a similar previous project as a basis and make adjustments for any known differences
Answer: D
Process - Task 5 - Manage Budget and Resources
The correct answer is D. If you want to estimate costs on a project quickly, you can use analogous estimating, which is when you use the total cost of a similar previous project as a basis and make adjustments for any differences. Choice B is wrong; bottom-up estimating is more accurate but is also slow and time consuming. Choice C is from another process.
You are managing a graphic design and print project. There is a 30% chance that the paper you are using will be too thin and you’ll have to reprint the presentation, which will cost you an extra $5,000. There is also a 20% chance that the high capacity ink cartridges you are using will last you longer than you expect, which will save you $1,000. What is your Expected Monetary Value (EMV)?
A. $4,000
B. $200
C. -$1,300
D. -$1,500
Answer: C
Process - Task 5 - Manage Budget and Resources
EMV is calculated by taking event #1 with a loss of $5,000 and multiplying it by the 30% probability to get negative $1,500. For event #2, you multiply the savings of $1,000 times the 20% probability to get positive $200. Add the two events and you get -$1,300.
You are the project manager for an IT project at a health care company. So far, the project is going well, however you have numerous risks which have been identified and are growing concerned with overall project risk. You have been asked by your sponsor to estimate the final cost of the project. Past experience with IT projects for this organization leads you to believe you will have similar variances in this project too. You have $50,000 in contingency reserves and are concerned this may not be enough. Given this information, what is the correct formula to use?
A. EAC = ETC - AC
B. EAC = BAC / CPI
C. EAC = (ETC - AC) / CPI
D. EAC = (BAC - EV) / (EAC - AC)
Answer: B
Process - Task 5 - Manage Budget and Resources
The risk information is an example of a red herring (information in the question that is not applicable). Since the question states you will have similar variances in this project too, this is the formula for EAC is BAC / CPI.
Management is worried about quality issues arising in the organization’s various projects. It wants to know which projects are having problems and which ones are doing well. If management receives the following information, which project should it be most worried about?
A. Project A with a benefit-cost ratio of 2.3
B. Project B with a benefit-cost ratio of 3.3
C. Project C with a benefit-cost ratio of -4.3
D. Project D with a benefit-cost ratio of -1.3
Answer: C
Process - Task 5 - Manage Budget and Resources
Project C with a benefit cost ratio of -4.3 should be most concerning. Since it is a negative number, the project is losing money. Project D also is losing money, but not as much.
Your project has recently been plagued by unforeseen events detrimental to the scope and quality of your project. During a project update meeting with the Sponsor, you have been asked to get the project back on schedule. After speaking with your Project Management Team, you decided to hire additional laborers and approve overtime for employees. What type of approach is this?
A. By approving over time, you are now able to speed up successor activities to bring the schedule back into compliance
B. You are utilizing the law of diminishing returns, whereby adding additional resources will align project work with the schedule baseline
C. You are utilizing excess funding to pay for more services, bringing the project schedule back in line
D. You are using reserves to authorize additional spending on resources in order to meet the scheduled deadline
Answer: D
Process - Task 5 - Manage Budget and Resources
In this scenario you are crashing the project by paying for additional services or resources to bring the project back into alignment with the Project Charter. Option A: at best is a mediocre example of leads; Option B: The law of diminishing returns simply states adding more resources does not necessarily improve capability or output. In fact, a point arises where the additional resource is a detriment to the project. Option C: Excess funding would not apply in this situation and typically this is an unrealistic expectation.
You just picked up a new project from a departing project manager, Victoire, with whom you met to discuss the performance of the project. She mentioned that the schedule has been challenging, and they have used fast tracking to stay on schedule. She is unsure about the budget since on-time delivery was a primary concern. Victoire tells you that EV is 20 and AC is $20. What is your CPI?
A. 4
B. 1
C. 2
D. 1.25
Answer: B
Process - Task 5 - Manage Budget and Resources
The formula for CPI is: EV/AC. In this case, that is 20/20, or 1.0, and you are on budget.
Your project sponsor advised you there is enough money in the budget to complete the IT project. However, the project is 40% complete and the cost performance index (CPI) is 0.75. Upon reviewing the original cost estimates, you learn the project was analogously estimated. The analogous estimate was then used to determine activity estimates. What should have been done to reach a more accurate estimate?
A. Use estimated costs to calculate CPI
B. Looked at lessons learned and other historical information to come up with the estimates
C. Perform bottom-up estimating to capture the details
D. Look at the SPI instead
Answer: C
Process - Task 5 - Manage Budget and Resources
Bottom-up estimating, while taking longer to do, will result in more accurate estimates. Analogous estimating uses historical information (Choice B). The percent complete and CPI is noise and not really what the question is asking. This question asks what you could have done differently, which indicates you could have done something different to prevent or avoid the problem. Using Schedule Performance Index (SPI) (Choice D) or Cost Performance Index (CPI) (Choice A) does not aid in coming up with more accurate estimates.
You recently identified the resources required for the project and you are ready to begin work. Since resources have been acquired, what should you do next?
A. Update the project charter with resource requirements
B. Annotate the resources by type and quantity on the activity list
C. Update the stakeholder register, risk register, and project schedule
D. Conduct a root cause analysis to determine the necessity of the activities
Answer: C
Process - Task 5 - Manage Budget and Resources
Once resources have been acquired, project documents must be updated to reflect any new information. The project charter would not need to be updated, because major requirements were identified during charter development. Requirements or resource guidelines would have been refined during the planning process group. You may have chosen answer B, but it states annotating resources by type and quantity. Since you have already acquired resources you would know more than type and quantity.
You are reviewing the actual costs spent to date as they relate to the costs which were budgeted, and have found that you exceeded the budgeted amounts in many areas. You take the next step to determine what is causing the variances, and how they may be addressed. Which of the following processes are you performing?
A. Estimate Costs
B. Control costs
C. Determine budget
D. Earned value management
Answer: B
Process - Task 5 - Manage Budget and Resources
Control Costs involves monitoring cost performance to detect cost variances from the budget and understand what is causing them. It is an ongoing process, and you will refer to the Cost Management Plan for guidance.
Your project consists of putting together a five-day facilitated workshop to serve as a steering committee for the transition of the organization. During the last few days, issues arise with who should be a voting member. Now a workshop with 75 personnel are trying to make a decision about who should be voting members without a consensus. How could the project manager have avoided this problem?
A. Identify voting members prior to the workshop based on project influence and involvement
B. The best decisions are made with groups of 5 to 11 people
C. Determine key stakeholders using a stakeholder engagement matrix
D. Reference OPAs concerning voting members and establish a team charter
Answer: A
Process - Task 5 - Manage Budget and Resources
Groups of 5 to 11 people are considered to make the best decisions, but this is not what the question asked. It asked how could the project manager have avoided the situation. Simply knowing groups sizes to make good decisions would not have avoided this situation. When conducting facilitated workshops, it is best to identify voting officials early and ensure those members have appropriate authority over the processes or organizational change being voted on.
You are a project manager for a large industrial engineering company. Your project has been progressing according to plan and you appear to be on budget and on schedule. However you have some key deliverables next month so you want to ensure that your cost and schedule controls are accurate. Which of the following is not an input to the Control Costs process?
A. Project management plan
B. Project funding requirements
C. Work performance data
D. Performance reviews
Answer: D
Process - Task 5 - Manage Budget and Resources
The inputs to the Control Cost process are project management plan, project funding requirements, work performance data, and organizational process assets. Performance reviews are a tool and technique of Control Costs.
You have identified five key stakeholders for your marketing project. This includes the Sponsor, the VP of Marketing, the VP of Operations, the CFO (Chief Financial Officer) and an IT Manager. The sponsor has been with the company for ten years and is well known throughout the company. The VP of Marketing is new to the company but has pledged support and most of the resources for the project. The marketing resources are key for this project. The VP of Operations will provide a few subject matter experts (SMEs), although this project is not a priority for her. The IT Manager has a high-level awareness of the project but his level of support is not yet known. Which stakeholder would you prioritize your time with?
A. The IT Manager, since the support for the project from that person is not yet known
B. The Sponsor, since he authorized you to work on the project
C. The CFO, since the budget is approved within his area
D. The VP of Marketing, since most of the resources come from his area
Answer: D
Process - Task 4 - Engage Stakeholders
Since most resources are coming from the Marketing area, and this is a Marketing project, the VP of Marketing will be very impacted as well as having a lot of power/influence in this project. The VP of Marketing is considered a key stakeholder and needs to be managed closely. While the Sponsor is definitely an important stakeholder, your time should be prioritized to work with the VP of Marketing. While it is important to understand the IT Manager and the CFO level of support, the priority should be the VP of Marketing. The IT Manager and CFO may or may not be heavily impacted by the project.
You are the project manager for the Computer Hardware Inventory Project. You have a piece of equipment that was purchased recently for $10,000 and is expected to last five years in production. At the end of the five years the expected worth of the equipment is $1,000. Using straight-line depreciation, what is the amount that can be written off each year?
A. Zero
B. $1,000
C. $1,800
D. $2,000
Answer: C
Process - Task 5 - Manage Budget and Resources
The straight-line depreciation takes the purchase value of the item, minus the salvage price of the item, divided by the number of time periods. In this instance, it would be $10,000 minus $1,000, or $9,000. The $9,000 is divided by five years and equates to $1,800 per year.
You are planning a new training program project and would like to create a buffer to allow for risks and unseen events that may occur. Your company procedures indicate a 20% contingency should be put on the schedule and budget. What is the difference between contingency reserves and management reserves?
A. Contingency reserves are meant for known unknowns and are part of the cost baseline; management reserves are for unknown unknowns and are not included in the cost baseline
B. Management reserves are considered part of the cost baseline, which is owned by the project manager and contingency reserves are under management control
C. Management reserves may be calculated using quantitative risk analysis
D. Both contingency and management reserves are included in the cost baseline
Answer: A
Process - Task 5 - Manage Budget and Resources
Choice B reverses management reserves and contingency reserves. Contingency reserves are considered part of the cost baseline and are owned by the project manager. These are meant to cover known unknowns. Management reserves are meant for unknown unknowns, which are unpredictable and cannot be proactively managed. Examples could be unpredictable events such as an earthquake or fires. Choice C is not true, as contingency reserves may be calculated using quantitative risk analysis. Choice D is incorrect, as the contingency reserves are the only reserves included in the cost baseline.
You are a project manager working on a consulting project with the state government. It is for a high speed rail system and cost and schedule are critical. You have a FPIF contract so you want to complete the project early, if possible. You used Agile methodology to speed up the process and want to see how you are doing. You have heard that budget freezes are imminent so you need to ensure that you have available funding. You know that BAC = 375, PV = 300, AC = 200 and EV = 250. Variances that have occurred on the project to date are not expected to continue. What is the ETC?
A. 75
B. 50
C. 125
D. 150
Answer: C
Process - Task 5 - Manage Budget and Resources
To answer this question, you first have to calculate EAC because you need that result to plug into the ETC formula. The correct formula for EAC where variances are atypical is: AC +(BAC - EV). Therefore, EAC for this question is as follows: 200 + (375 - 250) = 325. ETC equals EAC - AC. Therefore, ETC is as follows: 325 - 200 = 125.
Activity A is worth $200, is 100% complete, should have been done on day 1, and actually cost $200. Activity B is worth $75, is 90% complete, should have been done on day 2, and actually cost $120 so far. Activity C is worth $200. It is 75% complete, should have been done on day 3, and has cost $175 so far. The total budget is $1000. What is the planned value at the end of day 2?
A. $275.00
B. ($417.50)
C. $495.00
D. ($275.00)
Answer: A
Process - Task 5 - Manage Budget and Resources
The planned value as of day two would be $275.00. This is generated by adding the planned value of Activities A and B, which should have been done by the end of day 2 on the project.
You recently took over a project that has been subjected to intense criticism for its severe deviation from cost, scope, and scheduling. Stakeholders are losing focus and the project is quickly losing support. As a project manager how should you proceed?
A. Spend more time in the Initiation process group, thus ensuring a complete understanding of the project scope
B. Review the scope statement to determine deviations from cost and complete a stakeholder engagement assessment matrix
C. Complete a stakeholder engagement matrix, review the communications management plan and document analysis
D. Conduct a routine audit of the quality processes and control quality
Answer: C
Process - Task 4 - Engage Stakeholders
When taking over a project with disengaged stakeholders, the first thing a project manager should do is try to re-engage stakeholders. The project manager must determine their engagement level, identify the gaps and resolve their issues with constant communication according to the communications management plan. Additionally, a review of documents will allow the project manager to determine where the project should be and how to get it to the point it should be.
You are working as a project manager on a construction project. You determine that there is a 40% risk of a flood during a critical period in the project. If the flood occurs it will damage $40,000 worth of equipment. It will also cost an extra $10,000 to drain the water out of the construction site. You also note that there is a 35% chance that having a small amount of rain will help the landscaping around the construction site, which will save you $10,000 in irrigation costs. What is the EMV?
A. -$16,500
B. -$23,500
C. $40,000
D. $50,000
Answer: A
Process - Task 5 - Manage Budget and Resources
To calculate Expected Monetary Value (EMV), we multiply the probability of occurrence times the impact if the event does occur. We then aggregate the expected totals for each scenario to get an overall EMV. In this case, we take the cumulative impact of a flood (a $50,000 loss in total) and multiply it by the 40% probability of occurrence ($-50,000 x .4) to get a $20,000 expected loss. For the other scenario we take the $10,000 gain and multiply it by the 35% probability of occurrence (10,000 x .35) for a $3,500 expected gain. Then we add the $20,000 expected loss and the $3,500 expected gain (-$20,000 + $3,500) for a net expected loss of $16,500 (Overall EMV = $-16,500).
Your project has a budget of $130,000 and is expected to last ten months, with the work results and budget spread evenly across all months. The project just completed its third month, the work is on schedule, but you have spent $65,000 of the project budget. What is your cost variance?
A. $65,000
B. $39,000
C. ($26,000)
D. $64,999
Answer: C
Process - Task 5 - Manage Budget and Resources
-$26,000 is the variance. This is calculated by subtracting the actual costs of $65,000 from the earned value of $39,000. EV is calculated by taking the 30 percent completion of the project against the BAC. The project is considered to be 30 percent complete.
You are managing a project to implement electronic health records for all hospitals in the Arizona region. You have concluded requirements gathering and developed a scope, schedule and cost baseline. You then are presented with the request to expand this to other hospitals in the southwest region, in addition to Arizona. You met with your team to discuss the schedule and budget impact of this requested expansion. You presented this to the change control board and they approved the change. While you realize the baselines need to be adjusted, what is your other major concern at this point in time?
A. A need to revisit the Identify Stakeholders process to understand if any additional stakeholders need to be considered
B. Updating the risk register with additional risks which may arise due to this approved change
C. Looking at previous lessons learned to see if there are any implications for your project
D. Updating the charter to include the additional scope
Answer: A
Process - Task 4 - Engage Stakeholders
With this example of expansion of scope into another state, there is most likely additional stakeholders to be considered, along with gathering their requirements. You have finished collecting requirements and completed scope, schedule and cost baselines - additional stakeholders will most likely add to your requirements documentation. Looking at previous lessons learned and documenting additional risks (Choices B and C) is not a bad idea, just not as a first priority. Updating the charter (Choice D) is not necessary, the approved change request will include the additional scope.
If your AC = $3,000 and your EV = $3,400, what is the Cost Variance?
A. -400
B. No variance
C. 400
D. 1.13
Answer: C
Process - Task 5 - Manage Budget and Resources
The cost variance formula is: EV - AC. Solved here, it is: $3,400 - $3,000 = $400. This means that you have performed work worth $3,400 and only spent $3,000, so you are under budget.
You are managing a large construction project to build a much anticipated new arena for a possible expansion bid. This project has visibility from the local government, the citizens and the league. Your project has encountered some setbacks due to poor weather, however, these setbacks are not expected to continue based on the relevant weather information. Assuming EV = 145, PV = 162, AC = 138, BAC = 200, and CPI = 1.05, what is ETC?
A. 7
B. 55
C. 62
D. 9.6
Answer: B
Process - Task 5 - Manage Budget and Resources
ETC = EAC - AC, so you need to first calculate EAC. The EAC formula where variances are atypical = AC + (BAC - EV). Plugging in the numbers from the question, you get 138 + (200-145) = 193. Since ETC = EAC - AC, we plug in the numbers and get 193 - 138 = 55.
You are the project manager for a large healthcare organization. You have been assigned a project to develop a new system for a hospital your firm recently acquired. You are reviewing the Resource management plan. Which of the following should be included in this document?
A. Staff acquisition, specific activities that they will work on, staff release plan, training needs, recognition and rewards, compliance and safety
B. Organizational chart, staff release plan, training needs, recognition and rewards, compliance and safety
C. RACI matrix, organizational chart, roles & responsibilities, resource calendars
D. Staff acquisition and release plan, training needs, recognition and rewards, compliance, and safety matters
Answer: D
Process - Task 5 - Manage Budget and Resources
The resource management plan includes staff acquisition and release plan, training needs, recognition and rewards, and compliance and safety matters.
