Quality Management

Question 1

Your schedule projected that you would reach 50% completion today on a road construction project that is paving 32 miles of new highway. Every 4 miles is scheduled to cost $5,000,000. Today, in your status meeting, you announced that you had completed 20 miles of highway at a cost of $18,000,000. What is your Planned Value?

A. $12,800,000

B. $18,000,000

C. $20,000,000

D. $40,000,000

Answer 1

C. $20,000,000

Planned Value is calculated by multiplying the Budgeted At Completion y planned % complete. Our cost per mile is planned at $1,250,000 ($5,000,000 divided by 4 miles), and out Budgeted At Completion is 32 miles x 1,250,000/mile = $40,000,000. We planned to be 50% complete. Therefore, $40,000,000 x .50 = $20,000,000.

Question 2

If the CPI is 0.1, this indicates:

A. The project is performing extremely poorly on cost.

B. The project is costing 10% over what was expected

C. The project is only costing 90% of what was expected.

D. The project is performing extremely well on cost.

Answer 2

A. The project is performing extremely poorly on cost.

Understanding the concepts behind the earned value calculations is important for the exam and will help you with questions like this one. In this question, the terrible cost performance index indicates that we are getting ten cents of value for every dollar we spent; thus the project is doing very poorly on cost performance.

Question 3

Activity cost estimates are used as an input into which process?

A. Esticame Costs

B. Determine Budget

C. Analyze Cost

D. Control Costs

Answer 3

B. Determine Budget

Determine Budget takes the activity cost estimates (one fo the project documents) and uses them to create a budget.

Question 4

Based on the following Benefit Cost Ratios, which project would be the best one to select?

A. BCR = -1

B. BCR = 0

C. BCR = 1

D. BCR = 2

Answer 4

D. BCR = 2

With Benefit Cost Ratios, the bigger the better! BCR is calculated as benefit divided by cost, so the more benefit, and the less cost, the higher the number.

Question 5

The difference between present value and net present value is:

A. Present value is expressed as an interest rate, while net present value is expressed as a dollar figure.

B. Present value is a measure of the actual present value, while net present value measures expected present value.

C. Present value does not factor in costs.

D. Present value is more accurate.

Answer 5

C. Present value does not factor in costs.

There is a difference between present value and net present value. Present value tells the expected value of the project in today’s dollars. Net present value is the same thing, but it subtracts the costs after calculating the present value.

Question 6

Kayla is reviewing the budget and spending to ensure that she has enough money to pay vendors for the next project phase. The CFO of the company has provided extra funds to allow for contingencies, but Kayla is not yet confident that it is enough. Which process is Kayla most likely performing?

A. Plan Cost Management

B. Estimate Costs

C. Analyze Budget

D. Control Costs

Answer 6

D. Control Costs

Kayla is performing reserve analysis, which is one of the forms of data analysis. D emerges as the best coice since she is comparing the plan (budget) with actual performance (spending). This is classic for a monitoring and controlling process, and Control Costs si the only monitoring and controlling process in the list of choices.

Question 7

Your best cost estimate for an activity is $200,000, but the estimate you document has a range of $150,000 to $350,000. This ranged estimate represents a:

A. Cost estimate

B. Budgeted estimate

C. Rough order of magnitude estimate

D. Variable estimate

Answer 7

C. Rough order of magnitude estimate

Rough order of magnitude estimates are -25% to +75%. In this example, $150,000 and $350,000 are -25% to + 75% of $200,000.

Question 8

Which of the following process sequences is correct?

A. Create WBS, then Determine Budget, the Estimate Costs.

B. Create WBS, then Estimate Costs, the Determine Budget.

C. Determine Budget, then Estimate Costs, then Create WBS.

D. Estimate Costs, then Budget Costs, then Create WBS

Answer 8

B. Create WBS, then Estimate Costs, the Determine Budget.

This question may not look like it is about inputs and outputs, but it actually is. Create WBS is performed first out of the three processes, and the output is the Work Breakdown Structure (WBS). The WBS is used as an input for the next process of the three, Estimate Costs, where the costs of the activities are estimated and aggregated back to the WBS. Finally, the output of the process, the Cost Estimates, is used as an input into Determine Budget, which occurs last out of the three processes listed. By understanding how the outputs of one process become the inputs into another, it becomes simpler to understand the logical order of many of these processes.

Question 9

One of your team members makes a change to the budget with your approval. In what process is he engaged?

A. Plan Costs

B. Estimate Costs

C. Cost Management

D. Control Costs

Answer 9

D. Control Costs

The main clue here is “change”. If they are making approved changes, they are in a control process.

Question 10

After measuring expected project benefits, management has four projects from which to choose. Project 1 has a net present value of $100,000 and will cost $50,000. Project 2 has a net present value of $200,000 and will cost $75,000. Project 3 has a net present value of $500,000 and will cost $400,000. Project 4 has a net present value of $125,000 and will cost $25,000. Which project would be BEST?

A. Project 1

B. Project 2

C. Project 3

D. Project 4

Answer 10

C. Project 3

This one was very tricky! Net present value already has costs factored in, so they can be ignored here. The net present value is the only value you need to consider, and bigger is better!

Question 11

Your project office has purchased a site license for a computerized tool that assists in the task of cost estimating on a very large construction project for a downtown skyscraper. This tool asks you for specific characteristics about the project and then provides estimating guidance ased on materials, construction techniques, historical information, and industry practices. This tool is an example of:

A. Bottom-up estimating

B. Parametric modeling

C. Analogous estimating

D. Activity duration estimating

Answer 11

B. Parametric modeling

This is an example of parametric modeling. Parametric modeling is common in some industries, where you can describe the project in detail, and the modeling tool will help provide estimates based on historical information, industry standard, etc.

Question 12

If the Earned Value of a project on January 15 was $127,253, the Budgeted at Completion was $275,000, and the Schedule Performance Index was 0.77, how much work was expected to have been completed at that point?

A. $97,985

B. $127,253

C. $165,264

D. $211,750

Answer 12

C. $165,264

The first step in answering any question is to determine what is being asked. In this case, the question asked “how much work was expected to have been completed” at a point in time. That is the definitino of Planned Value (PV). In most scenarios, PV is given to you in order to calculate something else, but in this case you have to calculate it.

one way to do this using the information we have is to use the formula for SPI.

SPI = EV / PV. Using simple algebra, we can change it around to also say PV = EV / SPI, or PV = $127,253 / 0.77 = $165,264.

We can see that the project is behind schedule at this point and has not earned as much value as was expected.

The Budgeted at Completion (BAC) is not of any use here since we don’t know when the project was supposed to be completed or other helpful variables.

Question 13

You are maanging a project that is part of a large construction program. During the execution of your project you are alerted that the constructino of a foundation is expected to experience a serious cost overrun. What would be the FIRST course of action?

A. Evaluate the cause and size of the overrun.

B. Halt execution until the problem is resolved.

C. Contact the program manager to see if additional funds may be released.

D. Determine if you have sufficient budget reserves to cover the cost overrun.

Answer 13

A. Evaluate the cause and size of the overrun.

Your job as a project manger is almost always to evaluate and understand first. Know what you are dealing with before you take action, and don’t just accept anyone’s work for it. Verify the information yourself!

Question 14

If earned value = $10,000, planned value = $8,000, and actual cost = #3,000, what is the schedule variance?

A. -$2,000

B. $2,000

C. $5,000

D. -$5,000

Answer 14

B. $2,000

Schedule Variance is calculated as EV = PV. In this example, $10,000 - $8,000 = $2,000.

Question 15

Estimate to complete indicates:

A. The total projected amount that will be spent, based on past performance.

B. The projected remaining amount that will be spent, based on past performance.

C. The difference between what was budgeted and what is expected to be spent.

D. The original planned completion cost minus the costs incurred to date.

Answer 15

B. The projected remaining amount that will be spent, based on past performance.

The Estimate To Complete is what we expect to spend from this point forward, based on our performance thus far.

Question 16

The project team has been working significant overtime on a project for the past three months. The sponsor wants to know what the CPI will need to be from this point forward in order to meet original cost expectations. You know that at this point the Earned Value is $1,124,767, the total budget is $3,111,845, the Planned Value is $950,000, and the project has spent $1,000,975. What should you tell the sponsor?

A. 0.84

B. 0.94

C. 1.0

D. 1.21

Answer 16

B. 0.94

The sponsor is asking for the To-Complete Performance Index for cost (TCPIc). This scenario was a little bit tricky. Just because the team whas been workign overtime does not necessarily mean that they are behind schedule or over budget. in this situatino they have recently been working overtime and are still under budget.

To calculate the TCPIc, we’ll use the standard formula:

TCPIc = (BAC - EV) / Remaining funds

The BAC is given as the total budget in this question and is $3,111,845. The EV is also given at $1,124,767. Now we ahve to calculate remaining funds, which is the original budget minus actual costs. We know that the original budget was $3,111,845 and the project has incurred actual costs so far of $1,000,975, ahi ls sz $2,110,870 remaining funds. Now it becomes a matter of plugging numbers into the formula.

TCPIc = (BAC - EV) / Remaining Funds

TCPIc = ($3,111,845 - $1,124,767) / $2,110,870

TPCIc = $1,987,078 / $4,110,870

TPCIc = 0.94

The value of 0.94 means that the project could run somewhat over budget for the remainder of the time and still finish on target.

Question 17

If a project has a CPI of .95 and an SPI of 1.01, this indicates:

A. The project is grogressing slower and costing more than planned.

B. The project is grogressing slower and costing less than planned.

C. The project is progressing faster and costing more than planned.

D. The project is progressing faster and cost less than planned.

Answer 17

C. The project is progressing faster and costing more than planned.

A schedule performance index greater than 1 means that the project is progressing faster than planned. A cost performance index that is less than 1 means that the project is costing more than planned. Therefore choice C is the only one that fits.

Question 18

The best definitino of Earned Value is:

A. The measure of work performed expressed in terms of the budget authorized to perform that work.

B. Actual % Complex X the BAC

C. The value of the project at a point in time expressed in terms of the work performed.

D. Managing project performance in order to achieve expected results.

Answer 18

A. The measure of work performed expressed in terms of the budget authorized to perform that work.

This is the definition of Earned Value.

Question 19

Project A would yield $100,000 in benefit. Project B would yield $250,000 in benefit. Because of limited resources, your company can perform only one of these. They elect to perform Project B because of the higher benefit. What is the opportunity cost of performing Project B?

A. -$150,000

B. $150,000

C. -$100,000

D. $100,000

Answer 19

D. $100,000

Opportunity cost is simply how much benefit you are passing up. In this case, by choosing project B. You are foregoing $100,000 in expected benefit from project A, and that $100,000 represents the opportunity cost.

Question 20

As a project manager, your BEST use of teh project cost bseline would be to:

A. Measure and monitor cost performance on the project.

B. Track approved changes.

C. Calculate team perfomance bonuses.

D. Measure and report on variable project costs.

Answer 20

A. Measure and monitor cost performance on the project.

The cost baeline is used to track cost performance based on the original plan plus approved changes.

Question 21

The value of all work that has been completed so far is:

A. Earned value

B. Estimate at complete

C. Actual cost

D. Planned value

Answer 21

A. Earned value

Earned value is defined as the value of all work completed to this point.

Question 22

If the EAC for a project is $201,500, the ETC is $25,010, the SPI is 1.0, and the CPIc is 1.06, what is the BAC?

A. 23,594

B. 190,094

C. 201,500

D. 213,590

Answer 22

D. 213,590

The formula for EAC is EAC = BAC / CPIc. There is quite a bit of information here, but the only numbers that are relevant are the EAC and the CPIc. In this case we can use simple algebra to restate the formula as BAC = EAV x CPI, or BAC = $213,590, which is answer D.

Question 23

If you have a schedule variance of $500, this would indicate:

A. Planned value is less than earned value.

B. Earned value is less than the estimate at completion.

C. Actual cost is less than earned value.

D. The ration of earned value to planned value is 5:1.

Answer 23

A. Planned value is less than earned value.

Schedule variance is calculated as earned value - planned value. In this case, schedule variance could only be postitive if earned value is greater than planned value (or stated otherwise, if planned value is less than earned value). A is the only choice that has to be true.

Question 24

If budgeted at complete = $500, estimate to complete = $400, earned value = $100, and actual cost = $100, what is the estimate at complete?

A. $0

B. $150

C. $350

D. $500

Answer 24

D. $500

Teh estimate at complete is what we expect to ahve spent at the end of the project. It is calculated by taking our budgeted at complete and dividing it by our cost performance index. Step 1 is to calculagte our cost performance index. It is earned value / actual cost, and in this case it equals 1. Budgeted at complete is $500, and $500 / 1 = $500. therefore, D is the correct answer, indicating that we are progressing exactly as planned. Note that there are many ways to calculate the EAC, and not all of them agree perfectly. One other common way is EAC = AC + ETC, which yields the same answer of $500 for this example.

Question 25

You have spent $322,168 on your project to date. The program manager wants to know why costs have been running so high. You explain that the resource cost has been greater than expected and should level out over the next six months. What does the $322,168 represent to the program manager?

A. Earned value

B. Actual cost

C. Planned value

D. Cost performance index

Answer 25

B. Actual cost

Look at the first sentence “You have spend $322,168…” Actual Cost is what you have spent to date on the project.