M6 Proj Cost Mgmt (49)

Question 1

1) Tim is working on the cost estimate for his project. Because he is in the early phase of this project, he will develop a Rough Order of Magnitude (ROM) estimate. What is the expected degree of accuracy?

a. –25% to +75%
b. –5% to +10%
c. –25% to +25%
d. –50% to +25%

Answer 1

a. –25% to +75%

The best answer choice is A. The ROM typically varies between a –25% and a +75% accuracy.

Question 2

2) You need to determine how well your project is progressing from a cost standpoint. Your have determined that your actual cost to this point in time is $150,000 and your Earned Value is $135,000. Which of the following represents your Cost Performance Index?

a. 0.9
b. 1.1
c. $15,000
d. $135,000

Answer 2

a. 0.9

The best answer choice is A. Using the formula CPI = EV / AC, the resulting Cost Performance Index is 0.9, indicating that the project is over planned cost at this point in time.

Question 3

3) Establishing policies, procedures, and documentation for planning, managing, expending, and controlling project costs are elements of the process known as

a. Plan Cost Management
b. Project Integration Management
c. Project Time Management
d. Select Financial Metrics

Answer 3

a. Plan Cost Management

Plan Cost Management is the process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs.

Question 4

4) Which of the following are required in order to calculate the EAC forecast if future work will be performed at the budgeted rate?

a. BAC, EV, and AC
b. BAC, PV, and AC
c. BAC, EV, and PV
d. EAC, EV, and PV

Answer 4

a. BAC, EV, and AC

The best answer choice is A. The formula is EAC = AC + BAC – EV.

Question 5

5) A type of estimate done in the beginning of a project with a range of –25% to +75% is

a. Rough Order of Magnitude
b. Budgetary
c. Engineering
d. Definitive

Answer 5

a. Rough Order of Magnitude

This measurement band can differ by industry, but it is a standard generic rough order of magnitude range.

Question 6

6) Which of the following is used to compare actual project progress with planned progress?

a. Cost of Quality
b. Total Quality Management
c. Earned Value Management
d. Progressive elaboration

Answer 6

c. Earned Value Management

The best answer choice is C. Earned Value Management (EVM) is a methodology combining scope, schedule, and resource measurements to assess actual project performance and progress in comparison to planned progress at a specific point in time.

Question 7

7) Your current Earned Value on your project is $360,000 and you have calculated the SPI at 0.8. What is your Planned value at this point?

a. $360,000
b. $480,000
c. $450,000
d. $288,000

Answer 7

c. $450,000

The best answer choice is C. SPI = EV / PV. In this scenario, we would need to divide the Earned Value by the SPI in order to calculate the Planned value.

Question 8

8) Dena is managing a small project for a computer software development firm. The project is about half finished, and she is calculating the estimate at completion. From the following equations, which one should Dena use if she feels the remaining work will be accomplished at the planned rate.

a. EAC = AC + BAC – EV
b. EAC = BAC / CPI
c. EAC = AC + Bottom‐up ETC
d. EAC = AC + [(BAC – EV) / (CPI × SPI)]

Answer 8

a. EAC = AC + BAC – EV

The best answer choice is A. If future work is expected to be accomplished at the planned rate, the estimate at completion can be calculated as Actual Cost plus budget at completion minus earned value.

Question 9

9) Which is an example of an indirect cost?

a. Costs for purchasing supplies needed to complete a project
b. Expenses for traveling to the project site
c. Rent paid for your home office space
d. Payments to contractors hired to work on a project

Answer 9

c. Rent paid for your home office space

Indirect costs are those costs not directly attributable to a project, such as overhead, management salaries, and so on.

Question 10

10) Curtis is calculating the variance at completion on his project. If his budget at completion is $250,000 and his estimate at completion is $280,000, what is his variance at completion?

a. $30,000
b. –$30,000
c. $530,000
d. 0.89

Answer 10

b. –$30,000

The best answer choice is B. VAC = BAC – EAC. Because the BAC is $250,000 and the EAC is $280,000, this results in a negative $30,000 VAC.

Question 11

11) Which of the following choices are considered components of the schedule performance index?

a. Leads and lags
b. Critical Path Method
c. Earned Value and Planned value
d. Earned Value and Actual Cost

Answer 11

c. Earned Value and Planned value

The best answer choice is C. Schedule performance index is the ratio of Earned Value to Planned value. The formula is SPI = EV / PV.

Question 12

12) Parametric, analogous, and bottom‐up are estimating tools and techniques that are used in which of the following processes?

a. Plan Cost Management
b. Determine Budget
c. Estimate Costs
d. Control Costs

Answer 12

c. Estimate Costs

The best answer choice is C because the estimating techniques listed are tools and techniques of the Estimate Costs process.

Question 13

13) Don is managing a project that requires close supervision because of the client’s directive that it not go over budget. Don has determined the Earned Value to be $450,000. The Actual Cost is $425,000. What can Don conclude based on these numbers?

a. The project is $25,000 over budget
b. The project is $25,000 under budget
c. The project only has $25,000 left in the budget
d. The cost variance is 1.06

Answer 13

b. The project is $25,000 under budget

The best answer choice is B. The Cost Variance equation is EV – AC. In this case, because Actual Cost is less than Earned Value, the project is $25,000 under budget.

Question 14

14) Estimating costs is the process of determining the total cost for completing the project, and the accuracy of these estimates will increase as the project progresses. While working on a cost estimation for your new project, you have been asked to provide a Rough Order of Magnitude (ROM). What is the expected degree of accuracy using this type of estimate?

a. –10% to +25%
b. –50% to +50%
c. –5% to +10%
d. –25% to +50%

Answer 14

b. –50% to +50%

The best answer choice is B because ROM estimates typically vary by + or – 50%

Question 15

15) The project budget is created after the Estimate Costs process. Which of the following is NOT a technique used to determine the project budget?

a. Cost aggregation
b. Reserve analysis
c. Historical data
d. Resource requirements

Answer 15

d. Resource requirements

Resource requirements is not a technique used to determine the project budget. Instead, funding limit reconciliation is.

Question 16

16) The estimate at completion for your IT project is $125,000. At this point in the project life cycle, your actual cost is $90,000. What is your estimate to complete, assuming is proceeding on plan?

a. $35,000
b. $125,000
c. $215,000
d. $90,000

Answer 16

a. $35,000

The best answer choice is A. Estimate to Complete (ETC) can be calculated by subtracting the Actual Cost (AC) from the Estimate at Completion (EAC). The formula is ETC = EAC – AC.

Question 17

17) When estimating costs, project budgets typically include management reserves as well as contingency reserves. Select the option below that is true regarding management reserves.

a. They are seldom included in the funding requirements
b. They are included to cover unapproved changes
c. They are a factor in determining Earned Value
d. They are not part of the cost baseline

Answer 17

d. They are not part of the cost baseline

The best answer choice is D because management reserves are not included when creating the cost baseline.

Question 18

18) Max is managing a large construction project for senior living suites. His team has completed a variance analysis, and they have calculated several cost performance indicators including Cost Performance Index (CPI) and Cost Variance (CV). When they completed the calculations, they discovered a significant deviation between the actual performance and the cost performance baseline. Once this variance is detected, what should Max do immediately to restore the necessary cost performance?

a. Request more funding
b. Schedule a team meeting
c. Initiate a corrective action
d. Compress the schedule

Answer 18

c. Initiate a corrective action

The best answer choice is C. A corrective action is the first step Max should take in order to restore the necessary cost performance.

Question 19

19) Which document sets out the format and establishes the activities and criteria for planning, structuring, and controlling the project’s cost?

a. Activity cost estimates
b. Basis of estimates
c. Cost management plan
d. Spend plan

Answer 19

c. Cost management plan

The cost management plan describes the structure and criteria that will be used for cost planning, estimating, budgeting, and reporting.

Question 20

20) The expected total cost of completing all work expressed as the sum of the Actual Cost to date and the Estimate to Complete is known as

a. Estimate at Completion (EAC)
b. Planned Value (PV)
c. Earned Value (EV)
d. Estimate to Complete (ETC)

Answer 20

a. Estimate at Completion (EAC)

EAC is the expected total cost of completing all work expressed as the sum of the Actual Cost to date and the Estimate to Complete.

Question 21

21) Project costs are determined to a great degree by the effectiveness of the execution of the project work. Actual progress can be compared to planned progress by utilizing work performance information to generate activity metrics for evaluation. This type of comparison is used in which of the following?

a. COQ
b. EVM
c. WBS
d. BAC

Answer 21

b. EVM

The best answer choice is B because EVM (Earned Value Management) is used to evaluate project progress.

Question 22

22) What are the processes involved in project cost management?
a. Project execution, budget planning, force‐field analysis, visioning
b. Estimating costs, root‐cause analysis, brainstorming, problem‐solving
c. Plan cost management, estimate costs, determine budgets, control costs
d. Visioning, fishbone diagramming, gap analysis, controlling costs

Answer 22

c. Plan cost management, estimate costs, determine budgets, control costs

Project Cost Management includes the processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget.

Question 23

23) When a project involves work that was not identified during the planning process, this can cause budget overruns due to

a. Inaccurate estimating
b. Unplanned in‐scope work
c. Quality issues
d. Inappropriate estimating methods

Answer 23

b. Unplanned in‐scope work

If a project or product scope is not fully defined, additional work not identified during the planning process may be discovered as part of project execution. The work is in‐scope, but not planned for in the budget or schedule, causing overruns in both.

Question 24

24) Which of the following is NOT a common cause of cost overruns?

a. Inaccurate estimating
b. Unplanned, in‐scope work
c. Contractor underrun
d. A risk event occurring

Answer 24

c. Contractor underrun

A contractor underrun would be more of a cause of a budget underrun, not overrun.

Question 25

25) A cost baseline is an output of which cost management process?

a. Control costs
b. Estimate costs
c. Estimate activity resources
d. Determine budget

Answer 25

d. Determine budget

A cost baseline is an output of the determine budget process.

Question 26

26) What is NOT an output from any of the project cost management processes?

a. Cost management plan, causes of variances
b. Cost baseline, basis of estimates
c. Cost estimates, lessons learned
d. Cost designation, vendor acceptance

Answer 26

d. Cost designation, vendor acceptance

The outcome of the control cost outputs is the actual work performance information, such as the cumulative cost and schedule variances and the cumulative cost and schedule performance indexes. Cost designation and vendor acceptance has no pertinent meaning.

Question 27

27) The measurement that indicates how well you have to perform to meet a budget target is the

a. Cost Performance Index
b. To‐complete performance index (TCPI)
c. Schedule Performance Index
d. Estimate at Completion

Answer 27

b. To‐complete performance index (TCPI)

The TCPI tells you how efficiently you need to perform to hit a budget target.

Question 28

28) Funds that cover unplanned in‐scope work are called

a. Contingency reserve
b. Risk reserve
c. Management reserve
d. Risk response reserve

Answer 28

c. Management reserve

Management reserve is used for project changes to scope and cost. It covers work that is in‐scope, but unplanned.

Question 29

29) The authorized time‐phased budget is

a. The project baseline
b. The cost baseline
c. The project management plan
d. The performance baseline

Answer 29

b. The cost baseline

This is the authorized budget for the project, allocated over time.

Question 30

30) The most accurate form of estimating is

a. Parametric
b. Analogous
c. Three‐point
d. Bottom‐up

Answer 30

d. Bottom‐up

A bottom‐up estimate is the most accurate estimate. It also takes the most time to prepare.

Question 31

31) What is a disadvantage of using analogous estimating?
a. Can be used only when projects are similar in fact, not just in appearance
b. Computer program is needed
c. Interaction costs may be overlooked
d. Time consuming

Answer 31

a. Can be used only when projects are similar in fact, not just in appearance

Analogous estimating uses expert judgment and historical information to develop cost estimates. However, to be accurate, comparative projects must be similar in fact, not just in appearance.

Question 32

32) Joseph has just calculated the To‐complete performance index (TCPI) for his project and arrived at a number greater than 1.0. What does this indicate?
a. The remaining portion of the project will be easier to complete on budget.
b. The remaining portion of the project will be the same to complete on budget.
c. The remaining portion of the project will be harder to complete on budget.
d. The project is on schedule and on budget.

Answer 32

c. The remaining portion of the project will be harder to complete on budget.

The best answer choice is C. Because TCPI is a measurement of efficiency based on what has been done and what remains to be done to complete the project, a 1.0 TCPI indicates the rest of the project will require the same efficiency as that of the work that has already been completed. A number less than 1.0 indicates the required effort will be reduced, and a number greater than 1.0 indicates additional effort will be necessary to complete the project with the remaining resources.

Question 33

33) Which equation is used if the Cost Variance is assumed to be a one‐time event?

a. EAC = [(BAC – EV) / CPI] + AC
b. EAC = BAC – EV + AC
c. EAC = [(BAC – EV) / (CPI × SPI)] + AC
d. TCPI = (BAC – EV) / (BAC – AC)

Answer 33

b. EAC = BAC – EV + AC

EAC = BAC – EV + AC is used if the current Cost Variance is not expected to continue. It assumes that any existing variance is a one‐time event. Most people don’t consider this a valid way of calculating the EAC.

Question 34

34) What is Earned Value Management (EVM)?
a. The authorized budget assigned to scheduled work
b. The sum of all budgets established for the work to be performed
c. The realized costs incurred for the work performed on an activity during a specific time period
d. A methodology that combines scope, schedule, and resource measurements to assess project performance and progress

Answer 34

d. A methodology that combines scope, schedule, and resource measurements to assess project performance and progress

EVM integrates scope, schedule, and cost in the planning, monitoring, and controlling disciplines to assess project performance and progress.

Question 35

35) If you have a lot of uncertainty and risk associated with a particular work package, what type of estimate should you develop?

a. Analogous
b. Three‐point
c. Parametric
d. Bottom‐up

Answer 35

b. Three‐point

A three‐point estimate accounts for risk and uncertainty.

Question 36

36) Marsha is a new project manager and is working on determining her project budget. Because this is her first project, she wants to make certain that she doesn’t go over budget. In order to keep everything well organized, she has decided to begin by establishing the policies, procedures, and documentation for planning, managing, expending, and controlling project costs. In which of the following processes is Marsha involved?

a. Determine Budget
b. Control Costs
c. Estimate Costs
d. Plan Cost Management

Answer 36

d. Plan Cost Management

The best answer choice is D because the question defines Plan Cost Management.

Question 37

37) Which of the following is a measure of the cost efficiency of budgeted resources expressed as the ratio of Earned Value to Actual Cost?

a. CV
b. SV
c. CPI
d. SPI

Answer 37

c. CPI

The best answer choice is C. CPI (Cost Performance Index) compares Earned Value to Actual Cost to determine the cost efficiency of the project.

Question 38

38) When measuring how efficiently the project team is using their time, Wanda is using the Schedule Performance Index equation. Which of the following equations is she using?

a. SPI = EV / PV
b. SPI = EV / AC
c. SPI = PV / EV
d. SPI = PV / AC

Answer 38

a. SPI = EV / PV

The best answer choice is A. When calculating Schedule Performance Index, the Earned Value is divided by the Planned value. A result of less than 1.0 indicates the project is behind schedule.

Question 39

39) Rose is managing a project that is experiencing some scheduling issues, but the costs are going according to plan. She knows the Estimate at Completion and the Actual Cost of the work that has been accomplished to date. She wants to calculate the Estimate to Complete. In order to do so, which of the following equations should Rose use?

a. ETC = BAC / CPI
b. ETC = EV / PV
c. ETC = EAC – AC
d. ETC = BAC – EAC

Answer 39

c. ETC = EAC – AC

The best answer choice is C. The Estimate to Complete is the Estimate at Completion minus the Actual Cost.

Question 40

40) The BAC for your project is $450,000. You have determined your Earned Value and Actual Cost in order to calculate your CPI. Based on your current CPI of 0.95, and considering the CPI will remain at this level for the remainder of the project, which of the following represents your EAC?

a. $427,500
b. $473,684
c. $230,769
d. $877,500

Answer 40

b. $473,684

The best answer choice is B. The formula for EAC, in situations where the current CPI is expected to remain constant for the duration of the project, is EAC = BAC / CPI.

Question 41

41) Which of the following are inputs to the Determine Budget process?

a. Risk register
b. Reserve analysis
c. Project funding requirements
d. Cost baseline

Answer 41

a. Risk register

The best answer choice is A because it is the only choice that is an input to the Determine Budget process. Reserve analysis is a tool and technique of this process, and project funding requirements and the cost baseline are outputs.

Question 42

42) Costs associated with ___________________ can include the cost to mitigate a risk, purchase a bond or insurance, or provide some other appropriate risk response.

a. Contingency
b. Market conditions
c. High‐level risks
d. Specific risks

Answer 42

d. Specific risks

Costs associated with specific risks can include the cost to mitigate a risk, purchase a bond or insurance, or provide some other appropriate risk response.

Question 43

43) Which best defines lessons learned?
a. If changes have occurred or risk events have materialized, the baseline may be updated through a formal change control process.
b. Information that can be used later in the project and by other projects should be recorded.
c. If there are significant cost variances, estimating techniques may need to be revisited.
d. Corrective actions taken to address the variances should be cataloged.

Answer 43

b. Information that can be used later in the project and by other projects should be recorded.

PMBOK defines lessons learned as the learning gained from the process of performing the project. Formally conducted lessons learned sessions are traditionally held during project close‐out, near the completion of the project.

Question 44

44) Deborah’s project is at the midpoint in its schedule, and she needs to calculate the to‐complete performance index (TCPI). If she needs to determine the efficiency that must be achieved on the remaining work in order to complete the current Estimate at Completion (EAC), she will need to know the Budget at Completion (BAC), the EAC, and which of the following values in order to calculate her TCPI?

a. Earned Value and Actual Cost
b. Earned Value and Planned value
c. Planned value and Actual Cost
d. Cost Variance and Cost Performance Index

Answer 44

a. Earned Value and Actual Cost

The best answer choice is A. The equation for calculating TCPI to determine the efficiency that must be maintained in order to complete the current EAC is (BAC – EV) / (EAC – AC).

Note: This one (Mod6-CCP2-TB-008) appears to be off on the test bank… just the colors… keep in mind…

Question 45

45) Which of the following formulas would you use to determine Cost Variance?

a. CV = AC – EV
b. CV = PV – EV
c. CV = EV – AC
d. CV = EV / PV

Answer 45

c. CV = EV – AC

The best answer choice is C. Cost Variance is equal to Earned Value minus Actual Cost.

Question 46

46) If your SPI is greater than zero, which of the following is true?

a. The project is behind schedule.
b. The project is ahead of schedule.
c. Your project is on schedule.
d. Your earned value is zero.

Answer 46

b. The project is ahead of schedule.

The best answer choice is B. An SPI greater than zero indicates the project is ahead of schedule.

Question 47

47) Your company is in the process of estimating costs for the manufacture of a new concept aircraft navigation system. Initial estimates, based on manufacturing 200 of these units, was calculated at a fixed cost of $40,000 for tooling and a cost of $2,500 per unit. Market demand has risen above the original estimate, and the company has decided to produce 50 additional units. This has resulted in an increase of $300 additional cost per unit. Based on the new figures, and assuming the initial fixed cost for tooling remains the same, what is the estimated cost to manufacture 250 units?

a. $550,000
b. $560,000
c. $740,000
d. $700,000

Answer 47

c. $740,000

The best answer choice is C. In order to calculate this problem, the sum of fixed cost plus variable cost is multiplied by the final number of units. In other words, $40,000 + [(2,500 + $300) × 250] = $740,000.

Question 48

48) If you want to develop a forecast that shows the impact of your cost and schedule performance, which EAC should you use?

a. EAC = BAC – EV + AC
b. EAC = ((BAC – EV) / CPI) + AC
c. EAC = BAC/CPI
d. EAC = ((BAC – EV) / (CPI × SPI)) + AC

Answer 48

d. EAC = ((BAC – EV) / (CPI × SPI)) + AC

Use the equation that includes the SPI and CPI in the denominator.

Question 49

49) What are the tools and techniques used in Plan Cost Management?
a. Expert judgement, analytical techniques, and meetings
b. Project initiation team establishment, organizational structure mapping, and baseline project plan documentation
c. Project task division, creating an initial budget, identification and assessment of risks
d. Feasibility study, project scope coherence, WBS detail, schedule baseline

Answer 49

a. Expert judgement, analytical techniques, and meetings

Expert judgment, analytical techniques, and meetings are the tools and techniques used in Plan Cost Management.