Project Cost Management Questions

3/3/2014
Project Cost Management Questions
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1. Question
Your project has a budget of $10,000 and is expected to last for 1 year, with the work and budget spread evenly across all months. Right now CPI is 0.8. What
is Variance at Completion in this case?
$12,500
-$2,500
$10,000
$12,000
I n co rrect
Variance at Completion = BAC EAC Estimate at Completion (EAC) =BAC / CPI = $10,000 / .8 = $12,500 Variance at Completion = $10,000 $12,500 = -$2,500
2. Question
In an underground highway construction project, the project stakeholders have suggested many changes to the project scope. As you have already defined
the cost baseline in your project, you would like to revisit the baseline to see how these changes impact the overall cost of the project. So, you have started
an impact analysis to determine the impact, and inform the concerned stakeholders of all approved changes and the corresponding costs. You must use the
following to carry out such process:
C o n tro l C o sts
Control Scope
Control Communications
Control Risks
I n co rrect
The Control Costs process involves many activities such as influencing the factors that change the cost baseline, managing the actual changes, and
informing stakeholders of approved changes and corresponding costs. Since you are in the process of managing the cost changes and informing them to
the stakeholders, you are in the Control Costs process. [PMBOK 5th edition, Page 215]
3. Question
Lucy is currently preparing a high-level cost estimate for her project in the initiation phase. Given the limited detail available to her, what would you expect
the range of her estimate to be and what would you call such an estimate?
http://www.pmpden.com/pmbok-5-exam-questions/project-cost-management-questions/
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-5 to +10 %, Narrow
-25 to +25 %, Rough Order of Magnitude
-25 to +75 % , R o u g h O rd er o f Mag n itu d e
-1 to +1 %, Definitive
I n co rrect
During the initial stages of the project, the level of information available will be limited. Hence the Rough Order of Magnitude (ROM) estimate is usually
prepared and has an accuracy range of -25% to +75%. [PMBOK 5th edition, Page 201]
4. Question
The most recent analysis of Microcorps new fabrication facility renovation shows a CPI value of less than 1.0 What does this indicate?
The cost has underrun estimates

T h e co st h as o verru n estimates.
The schedule has slipped.
The project is running ahead of schedule.
I n co rrect
A CPI value of less than 1.0 indicates a cost overrun of the estimates. A CPI value greater than 1.0 indicates a cost underrun of the estimates. [PMBOK 5th
edition, Page 219]
5. Question
Variance analysis refers to cost performance measurements used to assess the magnitude of variation in comparison to the original cost baseline. What is
the trend on the percentage range of acceptable variances as the project progresses?
The percentage range of acceptable variances will tend to decrease first and then increase as the project progresses beyond 50% completion.
The percentage range of acceptable variances remain the same as the project progresses.
The percentage range of acceptable variances will tend to increase as the project progresses.
T h e p ercen tag e ran g e o f accep tab le varian ces w ill ten d to d ecrease as th e p ro ject p ro g resses.
I n co rrect
During the start of the project, larger percentage variances are allowed. However, as more work is accomplished, the percentage range of acceptable
variances will tend to decrease. [PMBOK 5th edition, Page 222]
6. Question
If you would like to base your project cost estimate on historical data and statistical analysis, which cost estimation technique would you use?
Parametric Estimatin g
Analogous Estimating
Vendor Bid Analysis
Bottom-up Estimating
I n co rrect
Parametric estimating is the process of using historical data to compare against your project to determine a correlation and thereby a cost estimate for
your current project. [PMBOK 5th Edition, Page 205]
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7. Question
You have just started a project. A project team member reports that 20 percent of the project is done. You agree with the completion status, but do not
change any of the progress in your report to the customer. This is an example of which one of the following?
50/50 Rule
Percent Complete Rule
0/100 R u le
20/20 rule
I n co rrect
The 0/100 Rule allows for zero percent credit on an activity until it is 100 percent complete. B is wrong (50/50 rule): 50 percent completion when the work
begins and 50 percent when the work is completed.
8. Question
A project manager is trying to plan for a contingency reserve as part of the cost estimates for the project. Which of these would be an incorrect way to plan
for contingency reserves?
S tart th e p ro ject w ith a z ero valu e fo r co n tin g en cy reserve.

Plan for contingency reserve as a fixed number.
Plan for contingency reserve as a percentage of the estimated cost
Use quantitative analysis methods to arrive at the contingency reserve.
I n co rrect
It would be incorrect to start the project with a zero value for contingency reserves. One of the three methods listed could be used to arrive at a
contingency reserve number. As more precise information about the project is available, the contingency reserve may be used, reduced or eliminated.
[PMBOK 5th edition, Page 206]
9. Question
You have a piece of equipment that was purchased for your project recently for $5,000 and is expected to last 5 years in production. At the end of the five
years, the expected worth of the equipment is $2,000. Using the straight-line depreciation, what is the amount that can be written off each year?
$600
$1200
$3000
Zero
I n co rrect
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. Calculation
is (5000-2000)/5 = $600.
10. Question
What is the present value if the organization expects to make $500,000 three years from now and the annual interest rate is 4 percent?
$26000
$25000
$4000
$5000
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I n co rrect
Present Value = FV/(1+R)n. FV is the future value, R is the interest rate, and n is the number of time periods. 500000/(5*5*5) = 4000.
11. Question
An estimating technique that uses a statistical relationship between historical data and other variables (for example, square footage in construction, lines of
code in software development) is known as:
Historical Analysis
I n co rrect
This technique is known as Parametric Estimating and can produce higher levels of accuracy depending on the sophistication, as well as the underlying
resource quantity and cost data built into the model. [PMBOK 5th edition, Page 205]
12. Question
Which of the below statement is true about Earned Value (EV)?
Earned Value (EV) is the physical work completed to date and the authorized budget for that
All
It is also called as BCWP (Budgeted Cost of Work Performed.)
It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned
I n co rrect
It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned.
Earned Value (EV) is the physical work completed to date and the authorized budget for that. It is also called as BCWP (Budgeted Cost of Work Performed).
13. Question
The formula for Cost Variance is:
CV=BAC-(AC-EV)
C V=EV-AC
CV=SV-BC
CV=AC-EV
I n co rrect
CV equals earned value (EV) minus actual cost (AC). [PMBOK 5th edition, Page 218]
14. Question
Which of the below statement is true about Cost Variance (CV)?
Negative CV, this means that the project is over budget

Any difference between the estimated cost of an activity and the actual cost of that activity
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Neg ative C V, th is mean s th at th e p ro ject is o ver b u d g et an d An y d ifferen ce b etw een th e estimated co st o f an activity an d th e
actu al co st o f th at activity
None
I n co rrect
Any difference between the estimated cost of an activity and the actual cost of that activity.
15. Question
You are a project manager who is in charge of an important project for your company. The project is 40% complete after 3 months and has cost $350,000.
The budget for the project is $950,000 and is scheduled to last 8 months. How is the project performing?
The project is behind schedule and over budget.

T h e p ro ject is ah ead o f sch ed u le an d u n d er b u d g et
The project is behind schedule and under budget
The project is ahead of schedule and over budget
I n co rrect
CPI=EV/AC CPI=(950,00*40%)/350,000 CPI=380,000/350,000 CPI=1.09(under budget); SPI=EV/PV SPI=380,000/(950,00 x 0.375) SPI=380,000/36,250 SPI=1.07
(ahead of schedule). [PMBOK 5th edition, Page 224]
16. Question
Two efficiency indicators that reflect the cost and schedule performance of a project are:
C o st Perfo rman ce I n d ex (C PI ) an d S ch ed u le Perfo rman ce I n d ex (S PI )

Actual Cost (AC) and Planned Value (PV)
Cost Projection Index (CPI) and Schedule Projection Index (SPI)
Cost Pricing Index (CPI) and Schedule Performance Index (SPI)
I n co rrect
The Cost Performance Index (CPI) and the Schedule Performance Index (SPI) are two efficiency indicators in the project to reflect the cost and schedule
performance of the project. [PMBOK 5th edition, Page 219]
17. Question
The Cost Management Plan is an output of the Plan Cost Management process. This plan is then integrated with other project plans in which of these
processes?
Develo p Pro ject Man ag emen t Plan

Monitor and Control Project Work
Direct and Manage Project Work
Perform Integrated Change Control
I n co rrect
The cost management plan is a component of the project management plan. Once the cost management plan is developed, it is integrated to the project
management plan during the Develop Project Management Plan process. [PMBOK 5th edition, Page 198]
18. Question
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Which of the below statement is true about Cost Performance Index (CPI)?
If CPI is less than 1, this means that the project is over budget
I f C PI is less th an 1, th is mean s th at th e p ro ject is o ver b u d g et an d also C PI = EV (Earn ed Valu e) / AC (Actu al C o st)
CPI = EV (Earned Value) / AC (Actual Cost)
None are true
I n co rrect
CPI = EV (Earned Value) / AC (Actual Cost) If CPI is less than 1, this means that the project is over budget.
19. Question
You have just been informed by your manager that you must present your project budget at a monthly executive level project review meeting prior to
submitting it for approval by the sponsor. This meeting is next week. However, the scope for this project has not yet been finalized, nor has the project
schedule. When you inform your manager of this fact, he advises you to just ballpark your budget. What do you do?
Come up with a rough order of magnitude estimate using parametric estimating technique
C o me u p w ith a ro u g h o rd er o f mag n itu d e estimate u sin g an alo g o u s estimatin g tech n iq u e
Come up with a narrow estimate using parametric estimating technique
Come up with a narrow estimate using analogous estimating technique
I n co rrect
You should come up with a rough order of magnitude estimate that is usually referred to as -25% to +75% estimate. You can quickly do this by using
analogous estimating technique. [PMBOK 5th edition, Page 201, 204]
20. Question
You have elected to use bottom-up estimating and will base your estimates on the WBS. Which one of the following is not an attribute of bottom-up
estimating?
People doing the work create the estimates

Less ex p en sive to d o th an o th er meth o d s o f estimatio n s
More expensive to do than other methods of estimations
Creates a more accurate estimate
I n co rrect
The bottom-up estimating is expensive. It is accurate. Estimating the cost of individual work items and then rolling up the costs to arrive at a project total
is more accurate.
21. Question
What does it mean if the Earned Value is equal to Actual Cost?
Project is on budget and on schedule

T h ere is n o co st varian ce
Schedule Variance Index is 1
There is no schedule variance
I n co rrect
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CV = EV AC. If the EV is equal to the AC then there is no cost variance on the project. [PMBOK 5th edition, Page 218]
22. Question
The Earned Value Management methodology can be used as a means to:
Calculate the profitability of the project

Calculate the number of days left in the project
Fo recast fu tu re p erfo rman ce b ased o n p ast p erfo rman ce
Calculate the value provided to the customer
I n co rrect
The Earned Value Management methodology can be used as a means to forecast future performance based on past performance. [PMBOK 5th edition,
Page 217]
23. Question
A large construction project for a logistics company will require the expenditure of a large amount of capital. The finance group works with the project
manager to project set limits when expenses will be incurred in a given project, and determine if there are ways to smooth out or level the spending to avoid
a single large expenditure one quarter and none the next. This is an example of:
Fu n d in g Limit R eco n ciliatio n

Rescheduling
Levelized Billing
A financial review
I n co rrect
Large variations in the periodic expenditure of funds are usually undesirable for organizational operations. Therefore, the expenditure of funds is
reconciled with the funding limits set by the customer or performing organization on the disbursement of funds for the project. [PMBOK 5th edition, Page
212]
24. Question
A project manager is performing Reserve Analysis as a technique in one of the project management process that he is currently working on. Which of these is
likely to be that process?
Estimate C o sts
Report Costs
Estimate Reserves
Plan Costs
I n co rrect
Many cost estimators include reserves (also called contingency allowances), as costs in their schedule activity cost estimates. Contingency reserves are
estimated costs to be used at the discretion of the project manager to deal with anticipated but not certain events. These events are known unknowns
and are part of the project scope and cost baselines. [PMBOK 5th edition, Page 206]
25. Question
Variance Analysis is an important tool used in the Control Costs Process. Which of the following statements regarding variances is correct?
T h e p ercen tag e ran g e o f accep tab le varian ces w ill ten d to d ecrease as mo re w o rk is acco mp lish ed
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The percentage range of acceptable variances will tend to increase as more work is accomplished
The percentage range of acceptable variances is high at the start of a project, tends to decrease in the middle of a project, and then tends to increase
as the project nears completion

The percentage range of acceptable variances is a constant all through the project
I n co rrect
Variances assess the magnitude of variation to the original cost baseline. The percentage range of acceptable variances will tend to decrease as more work
is accomplished and the project nears completion. [PMBOK 5th edition, Page 222]
26. Question
You are a senior project manager working for RETAMART, a retail shopping network that sells various consumer products. As part of the expansion plan
approved by the board of directors, you have been assigned as a project manager for a new plant. Due to transportation problems, the project has
undergone delays and the Schedule Performance Index (SPI) is found to be at 0.6 and the cost performance index (CPI) at 0.7. However, you expect some
improvements over next few weeks that may change schedule performance index to 1.1 and cost performance index to 0.9. Which of the following
statements will be true if your anticipated changes materialize?
The project will be on schedule and under budget

The project will be under budget but behind schedule
T h e p ro ject w ill b e o versp en t b u t ah ead o f sch ed u le
The project will be overspent and behind schedule
I n co rrect
The cost performance index above 1 indicates that the project is under budget and the schedule performance index above 1 indicates that the project is
ahead of schedule. If all of your anticipated changes happen to be true, the project will be overspent but ahead of schedule because the schedule
performance index will be greater than 1. [PMBOK 5th edition, Page 219]
27. Question
Which of these are not inputs to the Determine Budget process?
Project schedule, agreements

C o st b aselin e, req u iremen ts traceab ility matrix
Basis of estimates, activity cost estimates
Project schedule, resource calendars
I n co rrect
The cost baseline and the requirements traceability matrix are not inputs to the Determine Budget process. The rest are valid inputs. [PMBOK 5th edition,
Page 208]
28. Question
You are the project manager for the construction of a new Building. Before you begin to determine the budgeting process, which of the following inputs will
help you?
All
Activity Costs estimates and project schedule
Contracts
Scope Baseline
I n co rrect
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Four determine budget, inputs are: Activity Costs estimates and project schedule, Scope Baseline, Contracts, Basis of estimates and Organizational process
assets.
29. Question
An estimating technique that uses a statistical relationship between historical data and other variables (for example, square footage in construction, lines of
code in software development) is known as:
Historical Analysis
I n co rrect
This technique is known as Parametric Estimating and can produce higher levels of accuracy depending on the sophistication, as well as the underlying
resource quantity and cost data built into the model. [PMBOK 5th edition, Page 205]
30. Question
Funding requirements for a project are usually in incremental amounts that are not continuous, and these appear as a step function in the graph depicting
Cash flow, Cost baseline and Funding. Any gap at the end of the project, between the funds allocated and the cost baseline represents:
Contingency reserves
Charting error
Man ag emen t reserves
Cost variance
I n co rrect
Management reserves are included in the projects total funds but they are not included in the projects cost performance baseline. [PMBOK 5th edition,
Page 214]
31. Question
Megawatt is estimating the overall expected cost of a new ERP system deployment project using the actual costs of an earlier similar ERP system deployment
project as the basis for the cost. This is what type of estimating?
An alo g o u s
Bottom-up
Expert Judgment
Parametric
I n co rrect
Analogous cost estimating means using the actual cost of previous, similar projects as the basis for estimating the cost of the current project. Analogous
cost estimating is frequently used to estimate costs when there is a limited amount of detailed information about the project (e.g., in the early phases).
32. Question
You are the project manager of an AC Installation Project for a new building. Your BAC is $500,000. You are now 50 percent done with the project, though
your plan called for you to be 55 percent done with the work at this time. What is your earned value?
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$250,000
$275,000
$500,000
$345,000
I n co rrect
The earned value is calculated by multiplying the percentage of completion, 50 percent, by the BAC, which is $500,000, for a value of $250,000.
33. Question
Which statement is true about project cost?
All o f th e ab o ve
The cost of the equipment and materials needed to complete the project work must be factored into the project expenses
Costs associated with projects are not just the costs of goods procured to complete the project.
The cost of the labour may be one of the biggest expenses of a project.
I n co rrect
All are true
34. Question
You will be reporting to management, for the week of 07/15, that your project has an EV of $7700 and a PV of $9600. What is the status of your project?
Ahead of Schedule
On schedule
Not enough information provided
Beh in d S ch ed u le
I n co rrect
Your project is behind schedule. You had expected to have $9600 worth of work completed, that is your planned value (PV). However, you completed
$7700 (EV) worth of work. Your schedule variance is -$1900, SV=EV-PV. [PMBOK 5th Edition, Page 218]
35. Question
You are the Project Manager for Wicked Fast Cars, Corp. You are working on a project for the Human Resources department that is scheduled to take one
year. After three months into the project, you calculate the EV at $35,000 and the PV at $45,000. Which option below represents the value for the SV?
0.78
1.29
$10,000
-$10,000
I n co rrect
SV = Earned Value (EV) Planned Value (PV) SV = $35,000-$45,000 SV = -$10,000. [PMBOK 5th edition, Page 218]
36. Question
Which of the below statement is true?
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Actual Cost (AC): AC is the total cost incurred in accomplishing work on the schedule activity or WBS component during a given time period
Budget At Completion (BAC): The estimated total cost of the project when done
Determine Budget: Allocating the cost estimates to individual project components
All
I n co rrect
Budget At Completion (BAC): The estimated total cost of the project when done. Actual Cost (AC): AC is the total cost incurred in accomplishing work on the
schedule activity or WBS component during a given time period. Determine Budget: Allocating the cost estimates to individual project components.
37. Question
Which of the following statements are NOT true considering the planned value, the earned value, the schedule variance and the cost variance of a project?
The cost variance is the difference between the earned value and the actual cost
The planned value is the budget authorized to the work to be performed
The schedule variance is the difference between the earned value and the planned value
T h e earn ed valu e is th e valu e o f w o rk to b e co mp leted in terms o f th e ap p ro ved b u d g et
I n co rrect
Earned value is the value of the work already completed. This value is often expressed in terms of the approved budget assigned to the work completed.
The earned value is measured against the performance measurement baseline. [PMBOK 5th edition, Page 218]
38. Question
Which statement is true about Bottom-up estimating?
Estimatin g th e co st o f in d ivid u al w o rk items an d th en ro llin g u p th e co sts to arrive at a p ro ject to tal.

None of the above
Uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project.
Both of the above are true.
I n co rrect
Estimating the cost of individual work items and then rolling up the costs to arrive at a project total is more accurate.
39. Question
Which of the following statement is true about Schedule Variance?
Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity
S ch ed u le Varian ce (S V): An y d ifferen ce b etw een th e sch ed u led co mp letio n o f an activity an d th e actu al co mp letio n o f th at activity
an d a n eg ative resu lt mean s less w o rk h as b een p erfo rmed th an w as p lan n ed
A negative result means less work has been performed than was planned
None
I n co rrect
Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. SV = EV PV
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40. Question
You are the project manager of a project which is scheduled to last for 18 months. You have elected to rent a piece of equipment for the duration of a
project, even though you will need the equipment only for 6 months. The costs of the equipment rental per month are $120. This is an example of ___________.
None
Parametric Costs
Fix ed C o sts
Variable Costs
I n co rrect
This is an example of Fixed Costs because $120 per month is fixed.
41. Question
You are in the initiation phase of your project and believe the project can be completed for $100,000. However, you are an experienced project manager and
know that many things can happen between the initiation phase and the closure of the project. You have provided an estimate in the project charter of
$75,000 $175,000. This is an example of?
True Estimate
Narrow Estimate
Absolute Estimate
R o u g h O rd er o f Mag n itu d e Estimate
I n co rrect
A ROM estimate is given in the beginning of a project and is defined as -25% to +75% of the estimated cost. [PMBOK 5th edition, Page 201]
42. Question
As a project manager, you periodically do project performance reviews to compare cost performance over time, schedule activities or work packages overrunning and under-running budget, milestones due, and milestones met. Which of the following is not a valid analytical technique?
Earned Value Performance

Trend Analysis
Variance Analysis
I n terp erso n al skills
I n co rrect
Interpersonal skills is not a valid choice. The other three choices, namely Variance Analysis, Trend Analysis and Earned Value Performance, are analytical
techniques. [PMBOK 5th edition, Page 91, 92]
43. Question
Which of the following are inputs of Estimate Costs?
Risk Register
Human Resource Plan
All
Scope Baseline
I n co rrect
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Input of Estimate Costs: Scope Baseline, Human Resource Plan, Risk Register, Organizational process assets and Enterprise environmental factors.
44. Question
If You are the project manager for a Project. You are about to create the cost estimates for the project. Which of the following inputs will help you?
All o f th e ab o ve
Human Resource Plan
Risk Register
Scope Baseline
I n co rrect
Input of Estimate Costs are: Scope Baseline, Human Resource Plan, Risk Register, Organizational process assets and Enterprise environmental factors.
45. Question
If you want to print more than 25000 workbooks, printing of workbooks may be go up to 50000 workbooks . For every 5000 workbooks created, the cost is
reduced a percentage of the original printing cost. The workbook expense is an example of which one of the following?
Variab le C o sts
None
Fixed Costs
Parametric Costs
I n co rrect
This is an example of Variable Costs.
46. Question
Which of the following is the output of Estimate Costs process?
Activity C o st Estimates
WBS
Project Scope Statement
Output of Cost Estimation is Activity Cost Estimates.
I n co rrect
47. Question
20% of the work was completed in a project. At this stage the project manager determined that the budget at completion (BAC) was no longer viable and
developed a forecasted estimate at completion (EAC). What index can the project manager use to look at the calculated projection of cost performance that
must be achieved on the remaining work
Schedule Performance Index (SPI)

Cost Performance Index (CPI)
Cost Variance (CV)
T o -C o mp lete Perfo rman ce I n d ex (T C PI )
I n co rrect
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The to-complete performance index (TCPI) is the calculated projection of cost performance that must be achieved on the remaining work to meet a
specified goal such as the BAC or EAC. It is defined as the work remaining divided by the funds remaining. [PMBOK 5th edition, Page 221]
48. Question
How would you calculate your EAC if the ETC work will be performed at the budgeted rate?
EAC=(BAC-EV)*CPI
EAC = BAC/CPI
EAC= BAC-EV
EAC = AC + BAC - EV
I n co rrect
If the remaining project work is expected to be performed at the budgeted rate, the formula for EAC is AC + (BAC EV). [PMBOK 5th edition, Page 220]
49. Question
Large variations in the periodic expenditure of funds are undesirable for organizational operations. Therefore the expenditure of funds is frequently
reconciled with the disbursement of funds for the project. According to the PMBOK, this is known as:
Disbursement reconciliation
Expenditure Reconciliation
Budget Reconciliation
Fu n d in g Limit R eco n ciliatio n
I n co rrect
This is known as Funding Limit reconciliation. This will necessitate the scheduling of work to be adjusted to smooth or regulate those expenditures.
50. Question
Which is the least accurate approach in estimating?
R o u g h O rd er o f Mag n itu d e
Budget Estimate
WBS Estimate
Definitive Estimate
I n co rrect
The Rough Order of Magnitude is the least accurate approach; it may vary from -25 percent to +75 percent.
51. Question
In the earned value management technique, the cost performance baseline is referred to as:
Performance Base Value (PBV)

Performance Cost Baseline (PCB)
Cost Measurement Baseline (CMB)
Perfo rman ce Measu remen t Baselin e (PMB)
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I n co rrect
The cost performance baseline is an authorized time-phased budget at completion (BAC). It is used measure, monitor, and control overall cost
performance on the project. In the earned value management technique, it is referred to as the performance measurement baseline (PMB). [PMBOK 5th
edition, Page 218, 223]
52. Question
You are the project manager of the MKTG Project. The project has a budget of $200,000 and is expected to last for 2 years. The project is now 20 percent
complete and is on schedule. What is the BAC?
$200,000
$20,000
$50,000
$60,000
I n co rrect
The BAC is the budget at completion (Total budgeted cost), which is $200,000.
53. Question
Which of the following are parts of Project Cost Management?
All
Estimate Costs
Determine Budget
Control Costs
I n co rrect
Parts of Project Cost Management are: Plan Cost Management,Estimate Costs, Determine Budget and Control Costs.
54. Question
You are a project manager who is in charge of a technical documentation project. The project is 30% complete after 2 months and has cost $53,000. The
budget for the project is $90,000 and is scheduled to last 6 months. How is the project performing?
The project is ahead of schedule and under budget

The project is behind schedule and under budget.
The project is ahead of schedule and over budget.
T h e p ro ject is b eh in d sch ed u le an d o ver b u d g et.
I n co rrect
CPI=EV/AC CPI=(90,000*30%)/53,000 CPI=27,000/53,000 CPI=0.51(over budget) SPI=EV/PV SPI=27,000/(90,0000.33) SPI=27,000/29,970 SPI=0.9 (behind
schedule). [PMBOK 5th edition, Page 219]
55. Question
Which of the following statement is true ?
Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity
All
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Cost Variance (CV): Any difference between the estimated cost of an activity and the actual cost of that activity.
Schedule Performance Index (SPI): The ratio of work performed to work scheduled
I n co rrect
Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. Cost Variance (CV):
Any difference between the estimated cost of an activity and the actual cost of that activity. Schedule Performance Index (SPI): The ratio of work performed
to work scheduled.
56. Question
Which of the following is the output of Determining Budget ?
All
Project Funding Requirements
Cost Performance Baseline
Project Document Updates
I n co rrect
Outputs of Determine Budget: Cost Performance Baseline, Project Funding Requirements and Project Document updates.
57. Question
You are the project manager of an AC Installation Project for a new building. Your BAC is $500,000. You have spent $270,000 of your budget. You are now 50
percent done with the project, though your plan called for you to be 55 percent done with the work at this time. What is the CPI?
0.92
0.82
0.72
0.45
I n co rrect
CPI = EV / AC Earned Value/ Actual Cost The EV of $250,000 is divided by the AC of $270,000 for a value of .92.
58. Question
Your project is mid-way through a delivery schedule. As the project manager, you want to determine how much work is still left. Which is the most accurate
way to determine the remaining work to be carried out by the project team?
Earned Value Technique

Rolling wave method
A Man u al fo recast
Future analysis
I n co rrect
Although the Earned value technique of determining the balance work in the project is quick and automatic, it is not as valuable or accurate as the manual
forecasting of the remaining work by the project team. This however is more time-consuming. [PMBOK 5th edition, Page 220]
59. Question
You have two possible projects to manage, but you can only choose one. Project MKTG is worth $23,000, while Project SALESPTR is worth $25,000.
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Management elects to choose Project SALESPTR. Which one of the following is the opportunity cost of this choice?
$27,000
$4000
$23,000
$50,000
I n co rrect
The opportunity cost is the amount of the project that was not chosen.
60. Question
If you are influencing factors that create changes to the cost of the project, which process are you using?
Determine Budget
Estimate Costs
Negotiate Costs
C o n tro l C o sts
I n co rrect
Control Costs is the process of managing the projects costs and the changes that threaten the bottom line. [PMBOK 5th edition, Page 215]
61. Question
What is the BEST way to make an accurate forecasting of ETC?
EAC - AC
BAC EV
Man u al fo recastin g o f co st o f th e remain in g w o rk.
(BAC EV)/CPI
I n co rrect
Manual forecasting of costs for remaining work is generally the best means of generating an accurate forecast. [PMBOK 5th edition, Page 220]
62. Question
A project is estimated to cost $ 50,000 with a timeline of 50 days. After 25 days, the project manager finds that 50% of the project is complete and Actual costs
are $ 50,000. What is the Cost Performance Index (CPI) ?
The CPI is 2
The CPI is 1
The CPI is 1.5
T h e C PI is 0.5
I n co rrect
The correct answer is 0.5. The Cost performance Index (CPI) is given by the formula CPI = EV/AC where EV is the Earned Value and AC is the Actual Cost.
Earned Value = 50% of $ 50,000 = $ 25,000 since 50% of the project is complete. Hence CPI = 25,000 / 50,000 = 0.5. [PMBOK 5th edition, Page 219]
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63. Question
Which one of the following best describes analogous estimating?
Reserve analysis
Less accu rate
Three-points estimates
Bottom up estimating
I n co rrect
Analogous estimating is less accurate than other estimating methods.
64. Question
The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall cost performance of the project. It is
usually displayed in the form of:
An inverted S curve.
An S -cu rve
Pie-chart
A Z curve
I n co rrect
The correct response is S curve. The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall
cost performance of the project. It is usually displayed in the form of: an S curve and is developed by summing estimated costs by period. [PMBOK 5th
edition, Page 213]
65. Question
Your project has a budget of $240,000 and is expected to last for 1 year, with the work and budget spread evenly across all months. The project is now in the
fourth month, but the actual work completed is 20% of the total work. What is Schedule Performance Index (SPI) in this case?
2.5
1.66
1.9
1
I n co rrect
Schedule Performance Index (SPI) = Earn Value / Planned Value Earn Value = (Total Cost / total project months) * total months completed = ($240,000 / 12)
* 4 = $80,000 Planned Value = Total Cost *percentage actually completed = $240,000 * 20 / 100 = $48,000 SPI = $80,000 / $48,000 = 1.66
66. Question
Which of the following methods of forecasting EAC and ETC is the most accurate?
ETC based on BAC

ETC based on CPI and SPI
ETC based on CPI
ET C b ased o n n ew estimate
I n co rrect
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The bottom-up ETC gives the most accurate results. [PMBOK 5th edition, Page 220]
67. Question
Your project has a budget of $10,000 and is expected to last for 1 year, with the work and budget spread evenly across all months. Right now CPI is 0.8. What
is Estimate at Completion (EAC) in this case?
2.5
$12,500
$10,000
3.0
I n co rrect
Estimate at Completion (EAC) = BAC / CPI = $10,000 / .8 = $12,500
68. Question
Which of the following statement is true about Project Scope Statement?
It provides important information about project requirements that are considered during Estimating Costs
The project scope statement describes the business need, justification, requirements, and current boundaries of the project.
All
Contains project justification and the project objectives, which need to be considered
I n co rrect
Project Scope Statement: The project scope statement describes the business need, justification, requirements, and current boundaries for the project. It
provides important information about project requirements that are considered during Estimating Costs.
69. Question
John, a project manager, for Code Crashers Inc. has been assigned a project where he must lead a group of inexperienced programmers in developing a
software package that creates Material Safety Data Sheets (MSDS) for a chemical company. This is very similar to a project that his colleague, Peter, worked on
in 2006, with some junior programmers. If John needs to come up with a rough order of magnitude estimate, what tool or technique should he use?
Bottom Up Estimating
Parametric Estimating
An alo g o u s Estimatin g
Three-point estimate
I n co rrect
Analogous estimating is the correct choice. This technique relies on parameters from a similar previous project and is a gross value estimating approach. It
is also generally less accurate. [PMBOK 5th edition, Page 204]
70. Question
A project to construct 10 buildings in sequence, is estimated to cost $ 500,000 with a project timeline of 6 months. During a review after 3 months, the project
manager finds that only 4 buildings are ready. The Actual Cost is $ 200,000. The Schedule Performance Index (SPI) of the project would then be:
1.25
0.8
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Cannot be determined since the data is insufficient
1
I n co rrect
SPI = EV / PV. Earned Value = (4 / 10) * 500,000 = 200,000 since 4 buildings are completed out of 10. Planned Value = (5 / 10) * 500,000 = 250,000 since 5 of 10
buildings were expected to be completed. Hence SPI = 200,000 / 250,000 = 4 / 5 = 0.8 [PMBOK 5th Edition, Page 219]
71. Question
You are a Project Manager for Groceries R US, a supermarket chain, and are currently working on a project to build a new outlet. The planned values (PV) for
the foundation and the frame are $150,000 and $500,000. After five months, you do a performance measurement analysis. You are currently not ahead of
schedule. The actual costs for the foundation and frame were $175,000 and $650,000 up to this point where 100% of the foundation is complete and only
80% of the frame is complete. Which value represents the cost performance index (CPI) to two decimal places at this point in the project?
1.19
0.67
0.84
1.5
I n co rrect
Get the total for the actual costs by adding the $175,000 and $650,000 for the foundation and frame. The total is $825,000. Now calculate earned value. We
need to identify all of the activities that have been completed or partially completed as of the measurement date. If partially completed, we calculate the
fractional value of the budgeted cost for the activity by the percent completion. Add together the budgeted cost for completed or partially completed work
activities, INCLUDING any work that has been performed ahead of schedule. We are told that we are not ahead of schedule. So there is nothing to include
for the ahead of schedule category. 100% of the foundation is complete and only 80% of the frame is complete. So we add 100% of $150,000 and 80% of
500,000, which is $400,000, together to get a total earned value of $550,000. Now find the CPI by taking the total for EV $550,000 up to this point and
dividing it by the total of the actual cost $825,000 for the same time period. The result for CPI is 0.67. [PMBOK 5th edition, Page 219]
72. Question
Your project is running slightly over budget. You mention this to another project manager, who suggests you shift some of your expenses to indirect costs
that are not charged to your project budget. What do you do?
Examine project expenses to see if any are indirect expenses that could be taken off your project.
Reestimate the project.
Use yo u r reserves.
Fast track the project.
I n co rrect
You should use your project reserves to cover the budget overruns. Project managers are required to disclose accurate and truthful information about
their projects. Masking an expense or otherwise using a half-truth to cover a budget overrun is a violation of the PMI Code. [Reference - PMBOK 5th
edition, page 206 & PMI Code of Ethics and Professional Conduct, Page 2, 4, 5]
73. Question
You are a project manager of a project. Till today you have actually completed $34,000 of work and based on the cost plan it should have been $50,000. What
is Schedule Variance (SV) in this case?
-$16,000
$34,000
$23,000
$16,000
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I n co rrect
Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. SV = EV PV SV = $34,000
$50,000 = -$16,000
74. Question
A projects financial management reserve is identified in which process:
Determin e Bu d g et
Estimate Costs
Control Costs
Estimate Activity Resources
I n co rrect
The Management Contingency Reserve is identified in the Determine Budget process. [PMBOK 5th edition, Page 213]
75. Question
The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall cost performance of the project. It is
usually displayed in the form of:
Pie-chart
An S -cu rve
A Z curve
An inverted S curve.
I n co rrect
The correct response is S curve. The Cost Performance Baseline is a time-phased budget and is used as a basis to measure, monitor, and control overall
cost performance of the project. It is usually displayed in the form of: an S curve and is developed by summing estimated costs by period. [PMBOK 5th
edition, Page 213
76. Question
The Actual Cost (AC) is the total cost actually incurred and recorded in accomplishing work performed for an activity or work breakdown structure
component. What is the upper limit for the AC?
The Actual Cost (AC) is limited to the Planned Value (PV).

50% over and above the Planned Value (PV)
100% over and above the Planned Value (PV)
T h ere is n o u p p er limit fo r th e Actu al C o st (AC )
I n co rrect
There is no limit to the Actual Cost (AC). Whatever is spent to achieve the Earned Value (EV) is measured as the Actual Cost. [PMBOK 5th edition, Page 218]
77. Question
You are the project manager for Gleeson Associates. You are working together with a junior project manager on a project. You are currently discussing
performance measurement analysis with her. You explain to her exactly the different variables involved. You tell her all of the following statements are true
about the cost variance EXCEPT?
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I t is alw ays a p o sitive valu e
It is used to determine whether or not the project is meeting the planned costs
It is calculated by the following formula: Cost Variance = Earned Value - Actual Cost.
Its tendency is to decrease as the project is nearing the end.
I n co rrect
The cost variance can be a negative value, zero, or a positive value depending on the earned value and actual costs. A negative cost variance indicates that
the actual cost of the work was more than the amount of work being completed. [PMBOK 5th edition, Page 218]
78. Question
fourth month, the work is on schedule, but you have already spent $120,000 of the project budget. What is your COST Variance in this case?
$240,000
$40,000
None
-$40,000
I n co rrect
Cost Variance = Earn Value Actual Cost Earn Value = (Total Cost/total project months) * total months completed = ($240,000 / 12)*4=$80,000 CV = $80,000$120,000 = -$40,000
79. Question
You are the project manager of a Project. Your project will cost your organization $50,000 to complete over the next 3 months. Once the project is completed,
the deliverables will let the company earn $5000 per month. What is the time to recover the costs of the project?
2 Years
1 Year
10 Mo n th s
3 Years
I n co rrect
This is calculated by dividing the ROI of $5000 per month into the project cost. 50000/5000 = 10 months
80. Question
As part of EVM, a project manager is calculating the to-complete performance index (TCPI) based on EAC. The data that he has is: the budget at completion
for the project is $ 100,000. The earned value for the project is $ 25,000. The actual costs to date are 40,000 and the estimate at completion is $ 115,000. What
is the TCPI that he will obtain?
1
0.9
1.1
0
I n co rrect
TCPI based on EAC = (BAC-EV)/(EAC-AC) = (100000 25000) / (115000 40000) = 75000/75000 = 1 [PMBOK 5th edition, Page 221]
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81. Question
Your company has been hired to configure software at 500 workstations. All workstations need equal time to configure. The contract for the project is set at a
fixed cost, and the incentive based on how fast the project work is going to be completed. Management has requested that you study the work method to
determine a faster, less costly, and a better method to complete the project. This scenario is an example of _________.
Time Constraint
Schedule Constraint
Learning Curve
Valu e An alysis
I n co rrect
Value Analysis is a systematic approach to find less costly ways to complete the same work. A and B are incorrect, as this situation does not describe a
specific time or cost constraint. D is incorrect: the learning curve happens as the project team completes the work.
82. Question
Given the following estimates: Optimistic 3 days, Pessimistic 9 days, and most likely 6 days. What is the PERT weighted average?
6.3
4
6.1
6
I n co rrect
Optimistic = tO, most likely = tM, Pessimistic = tP. PERT weighted average = (tO + 4*tM + tP)/6 = (3+4*6+9)/6 = 36/6 = 6
83. Question
fourth month, but till now total spending for this project is $5,000. What is Variance at Completion in this case?
$13,000
-$5,000
$12,000
-$3,000
I n co rrect
Earn Value = (Total Cost / total project months) * total months completed = ($12,000 / 12) * 4 = $4,000 Variance at Completion = BAC EAC CPI = EV (Earned
Value) / AC (Actual Cost) = $4000/$5000 = .8 Estimate at Completion (EAC) = BAC/CPI = $12,000 / .8 = $1500 Variance at Completion = $12,000 $15,000 = $3,000
84. Question
A project manager is analyzing the relationship between the consumption of project funds and the physical work being accomplished for such expenditures.
In which project management process would this be done?
Determine Budget
C o n tro l C o sts
Estimate Costs
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Manage Costs
I n co rrect
Control Costs is the process of monitoring the status of a project to update the project budget and managing changes to the cost baseline. Much of the
effort of cost control involves analyzing the relationship between the consumption of project funds to the physical work being accomplished for such
expenditures. [PMBOK 5th edition, Page 215]
85. Question
You are working for FALCON highway construction agency as a project cost estimator. The agency started a highway construction project which is in its
planning phase. The rough order of magnitude (ROM) cost estimate for the project is expected to be between 3 and 5 million dollars in the planning phase
with a ROM of -25% to +25%. What will be the ROM estimate in the execution phase if it changes to -10% to +10%?
Betw een 3.6 an d 4.4 millio n d o llars

Between 3.1 and 4.1 million dollars
I n co rrect
Since the Rough Order of Magnitude (ROM) in the planning phase is -25% to +25%, the estimated mean value is 4 million dollars. If the estimates narrows
down to -10% to +10% it becomes 3.6 to 4.4 million dollars. [PMBOK 5th edition, Page 201]
86. Question
Which estimating technique is most accurate?
Analogous estimating
Parametric modelling
Bo tto m-u p estimatin g
None of the above
I n co rrect
Bottom-up estimating: Estimating the cost of individual work items and then rolling up the costs to arrive at a project total is more accurate.
87. Question
Variance thresholds for monitoring cost performance are typically expressed as _______________ from the baseline plan.
Negative deviation
Positive deviation
Percen tag e d eviatio n
Average deviation
I n co rrect
Variance thresholds for monitoring cost performance are usually expressed as percentage deviations from the baseline plan. [PMBOK 5th Edition, Page
199]
88. Question
A variance threshold for costs or other indicators to indicate the agreed amount of variation allowed is called:
24/29
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Upper control limits
C o n tro l th resh o ld s
Upper specification limit
Cost overrun
I n co rrect
Control thresholds are variance thresholds for costs or other indicators such as person days and indicate the agreed amount of variation allowed.
89. Question
Contingency Reserves are estimated costs to be used at the discretion of the project manager to deal with:
An ticip ated b u t n o t certain even ts.

Anticipated and certain events
Scope creep
Unanticipated events
I n co rrect
Contingency Reserves are estimated costs to be used at the discretion of the project manager to deal with anticipated, but not certain events. These are
also called as Known unknowns. [PMBOK 5th edition, Page 206]
90. Question
You are the project manager for a project. The customer has requested that you factor in after-project costs, such as maintenance and service. This is an
example of which one of the following?
Project Spin off

Life C ycle co sts
Scope Creep
Operations
I n co rrect
The after-project costs are known as Life Cycle costs.
91. Question
You are the Project Manager for JTs Lumber Yard. You are trying to forecast estimates for the last phase of the project you are currently working on. Based
on the performance of the project to date, which formula can be used to estimate the total value of the project when completed assuming similar variances
will not occur?
SV = EV - PV
ETC = (BAC - EV)/CPI
CPI = EV/AC
EAC = AC + BAC - EV
I n co rrect
The formula EAC = AC + BAC EV is used to determine the total value of the project when completed assuming similar variances will not occur for the
uncompleted project activities. [PMBOK 5th edition, Page 220]
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92. Question
Analogous Cost Estimating is which of the following?
Bottom-up estimating
Generally accurate
Gen erally less accu rate
Uses statistical relationship between historical data and other variables
I n co rrect
Analogous cost estimating is generally deemed less accurate than other methods of estimation. [PMBOK 5th edition, Page 204]
93. Question
Lucy is currently preparing a high-level cost estimate for her project in the initiation phase. Given the limited detail available to her, what would you expect
the range of her estimate to be and what would you call such an estimate?
-25 to +25 %, Rough Order of Magnitude

-5 to +10 %, Narrow
-1 to +1 %, Definitive
-25 to +75 % , R o u g h O rd er o f Mag n itu d e
I n co rrect
During the initial stages of the project, the level of information available will be limited. Hence the Rough Order of Magnitude (ROM) estimate is usually
prepared and has an accuracy range of -25% to +75%. [PMBOK 5th edition, Page 201]
94. Question
Your company has been hired to configure software at 500 workstations. All workstations need equal time to configure. You calculate the time to configure
each workstation as 5 hours. The cost for labor is calculated at $500 for each workstation. Your Project Sponsor disagrees with your labor estimate. Why is it
so?
You have not factored in all of the effort applied to the work.
You have not considered the law of diminishing returns.
You haven't completed one workstation yet, so you don't know how long the work will actually take
Yo u h ave n o t co n sid ered th e learn in g cu rve.
I n co rrect
As the project team completes more and more units, the time to configure a workstation should take less and less time.
95. Question
Which of the following statement is true about Control Costs ?
Monitoring cost performance to detect variances from the plan

Recording all appropriate changes accurately against the cost baseline
Influencing the factors that create changes to the cost baseline
All
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I n co rrect
96. Question
Given the following estimates: Optimistic 3 days, Pessimistic 9 days, and most likely 6 days. What is the Triangular Distribution (tE) ?
6.3
4
6.1
6
I n co rrect
Optimistic = tO, most likely = tM, Pessimistic = tP. Triangular Distribution = (tO + tM + tP)/3 = (3+6+9)/3 = 18/3 = 6
97. Question
Your Vice President has asked you what the Estimate at Completion is going to be for a small project you are working on. You were given a budget of $30,000,
and to date you have spent $20,000 but only completed $10,000 worth of work. You are sure that the future work will be accomplished at the planned rate.
$40,000
$60,000
$30,000
$10,000
I n co rrect
If the future work will be accomplished at the planned rate, then then Estimate at Completion (EAC) will be AC+BAC-EV. Budget at Completion (BAC) is
$30,000, Earned Value (EV) is $10,000 and Actual Cost (AC) is $20,000. Hence the EAC is $40,000. [PMBOK 5th edition, Page 224]
98. Question
You are a project manager of a project. Till today you have actually completed $34,000 of work, but based on the cost plan it should have been $50,000. What
is percentage Schedule Variance (SV) in this case?
-16%
28%
-32%
32%
I n co rrect
Schedule Variance (SV): Any difference between the scheduled completion of an activity and the actual completion of that activity. SV % = (EV PV) / PV SV %
= ($34,000 $50,000) / $50,000 = -32%
99. Question
You are aware that cost and schedule risks are prevalent in your project. You want to compare the planned project performance with its actual performance.
What should you perform to provide this information?
Reserve analysis
Varian ce an d tren d an alysis
Risk audit
27/29
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Risk reassessment
I n co rrect
Variance and trend analysis are used to evaluate the differentials between planned and actual costs, schedules, and performance criteria. A variety of
statistical techniques, such as Earned Value (EV) technique, are used to analyze these variances. [PMBOK 5th edition, Page 222]
100. Question
fourth month, the work is on schedule, but you have spent $120,000 of the project budget. What is your COST Variance percentage in this case?
40%
-50%
50%
None
I n co rrect
Cost Variance = Earn Value Actual Cost Earn Value = (Total Cost/total project months) * total months completed = ($240,000 / 12) * 4 = $80,000 CV =
$80,000 $120,000 = -$40,000 CV % = CV / EV = -$40,000/$80,000 = -50%
101. Question
Martin is the project manager of a project that is in an early phase. He needs to estimate costs but finds that he has a limited amount of detailed information
about the project. Which of the following estimation techniques would be least suited to his requirements?
Top-down Estimating
Bo tto m-u p Estimatin g
Budgetary Estimating
I n co rrect
Bottom-up estimating is a technique that can be applied only when there is a sufficient amount of detail available to the project manager. [PMBOK 5th
edition, Page 205]
102. Question
A project manager is estimating project costs and needs to decide whether the estimates will include only direct costs, or whether the estimates will also
include indirect costs. In which of the following phases does this decision need to take place?
Determine Budget
Estimate C o sts
Define Scope
Plan Expenses
I n co rrect
This is done in the Estimate Costs process. The project manager works in accordance with the organizations guidelines and decides whether the estimates
will be limited to direct project costs only or whether the estimates will also include indirect costs. Indirect costs are those that cannot be traced to one
specific project, and are usually allocated equitably over multiple projects. [PMBOK 5th edition, Page 202]
103. Question
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Which of the following statement is true about Work Breakdown Structure (WBS)?
It is used to organize the cost estimates and to ensure that the cost of all identified work has been estimated.
It identifies the project elements that require resources.
All
It provides the relationship among all the components of the project and the project deliverable.
I n co rrect
Work breakdown structure (WBS): It identifies the project elements that require resources, used to organize the cost estimates and to ensure that the cost
of all identified work has been estimated, and provides the relationship among all the components of the project and the project deliverable.
104. Question
You have elected to use parametric modelling while Estimating Costs for the project. Which one of the following is an example of parametric modelling?
Historical information from a similar project

Estimates based on top-down budgeting
Estimates built from bottom-up based on the WBS
$10 p er p o u n d
I n co rrect
$10 per pound is an example of parametric modelling. Parametric modelling: Using project characteristics (or parameters) in a mathematical model to
predict costs (e.g., price per square foot). B is incorrect, as historical information is analogous, not parametric. C is incorrect; bottom-up estimating is not a
parametric modelling. D is incorrect, top-down budgeting is related to analogous estimating .
105. Question
The Budget at Completion (BAC) for a project is $50,000. The Actual Costs (AC) to date are $10,000. The Earned Value (EV) is $7,000. At this stage, the project
management team did a manual bottom-up summation of costs and forecast an Estimate to Complete (ETC) of $50,000. What is the Estimate at Completion
(EAC) for the project?
$57,000
$40,000
$60,000
$53,000
I n co rrect
When a bottom-up manual forecasting has been done for the ETC, the calculation for EAC is given by: EAC = AC + bottom-up ETC Hence, EAC = 10,000 +
50,000 = $60,000. Note that the BAC is no longer viable at this stage. [PMBOK 5th edition, Page 220]
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