Himanshu Agarwal

Not Just Another Project Manager

Project Cost Management

  1. What is the MOST important factor to consider when developing a cost management plan?
    • The project budget.
    • Stakeholder requirements.
    • The project schedule.
    • The project team’s experience.
  2. Which of the following is a characteristic of parametric estimating?
    • It uses historical data from similar projects.
    • It involves a detailed, bottom-up approach.
    • It uses statistical relationships between variables.
    • It considers optimistic, pessimistic, and most likely scenarios.
  3. What is the term for the authorized budget assigned to scheduled work?
    • Actual Cost (AC)
    • Earned Value (EV)
    • Planned Value (PV)
    • Budget at Completion (BAC)
  4. Which of the following is a primary input to the Control Costs process?
    • Project Scope Statement
    • Risk Management Plan
    • Work Performance Data
    • Stakeholder Management Plan
  5. What is the formula for calculating the Estimate to Complete (ETC) when the initial plan is flawed and the CPI is not expected to improve?
    • BAC – EV
    • EAC – AC
    • BAC / CPI
    • EAC / CPI
  6. Which cost management tool helps to visualize and track the project’s cost performance over time, allowing for the identification of trends and potential future deviations?
    • Cost Management Plan
    • Earned Value Analysis
    • Funding Limit Reconciliation
    • Reserve Analysis
  7. What is the difference between contingency reserves and management reserves?
    • Contingency reserves are for known risks, while management reserves are for unknown risks.
    • Management reserves are part of the performance measurement baseline, while contingency reserves are not.
    • Contingency reserves are controlled by the project manager, while management reserves require management approval.
    • There is no significant difference between the two; they are interchangeable terms.
  8. Which of the following is an example of a variable cost?
    • Rent for the project office
    • Salaries of permanent project team members
    • Cost of raw materials used in production
    • Insurance premiums for the project
  9. What is the expected range of accuracy for an analogous estimate?
    • -5% to +10%
    • -10% to +25%
    • -25% to +75%
    • -50% to +100%
  10. Which of the following is a tool and technique used in the Determine Budget process?
    • Earned Value Analysis
    • Trend Analysis
    • Cost Aggregation
    • Variance Analysis
  11. A project has a planned value (PV) of $800, an earned value (EV) of $700, and an actual cost (AC) of $750. What is the Schedule Variance (SV)?
    • $50
    • -$50
    • $100
    • -$100
  12. Which of the following is a potential output of the Estimate Costs process?
    • Project Budget
    • Cost Management Plan
    • Basis of Estimates
    • Performance Reports
  13. What is the primary goal of the Plan Cost Management process?
    • To create the project budget.
    • To define how costs will be managed throughout the project.
    • To monitor and control project spending.
    • To estimate the resources needed for the project.
  14. Which of the following is NOT a typical element of the project budget?
    • Direct Costs
    • Indirect Costs
    • Contingency Reserves
    • Opportunity Costs
  15. What is the purpose of a Basis of Estimates?
    • To document how the project budget was developed.
    • To explain the assumptions and constraints used in cost estimates.
    • To track the actual costs incurred during the project.
    • To forecast the final project cost.
  16. Which cost estimating technique is generally the most accurate?
    • Analogous estimating
    • Parametric estimating
    • Bottom-up estimating
    • Three-point estimating
  17. What does a Cost Performance Index (CPI) greater than 1 indicate?
    • The project is over budget.
    • The project is under budget.
    • The project is behind schedule.
    • The project is ahead of schedule.
  18. Which of the following is a benefit of using Earned Value Management (EVM)?
    • Improved team communication.
    • Enhanced stakeholder engagement.
    • Early identification of cost and schedule variances.
    • More accurate risk assessments.
  19. What is the total approved budget established for the project called?
    • Cost Baseline
    • Project Budget
    • Budget at Completion (BAC)
    • Performance Measurement Baseline
  20. Which of the following is a tool used for forecasting in the Control Costs process?
    • Variance Analysis
    • Trend Analysis
    • Earned Value Analysis
    • Reserve Analysis
  21. A project manager is reviewing a cost report that shows a significant negative Cost Variance (CV). What should be the NEXT step?
    • Immediately cut project spending.
    • Re-baseline the project budget.
    • Investigate the reasons for the variance.
    • Report the variance to the stakeholders.
  22. Which of the following is a key input to the Determine Budget process?
    • Project Charter
    • Staffing Management Plan
    • Cost Estimates
    • Communications Management Plan
  23. What is the formula for calculating the three-point estimate using the triangular distribution?
    • (Optimistic + Pessimistic + Most Likely) / 2
    • (Optimistic + 4 * Most Likely + Pessimistic) / 6
    • (Optimistic + Most Likely + Pessimistic) / 3
    • (Optimistic + 2 * Most Likely + Pessimistic) / 4
  24. Which of the following is a characteristic of fixed costs?
    • They change in proportion to the level of production.
    • They remain constant regardless of the level of production.
    • They are directly attributable to specific project activities.
    • They are incurred only when the project is behind schedule.
  25. What is the purpose of funding limit reconciliation?
    • To allocate budget to different work packages.
    • To ensure that expenditures align with funding availability.
    • To track the actual spending against the planned budget.
    • To forecast the final cost of the project.
  26. Which of the following is a tool and technique used in the Plan Cost Management process?
    • Earned Value Analysis
    • Reserve Analysis
    • Expert Judgment
    • Cost Aggregation
  27. What does a Schedule Performance Index (SPI) less than 1 indicate?
    • The project is ahead of schedule.
    • The project is behind schedule.
    • The project is on budget.
    • The project is over budget.
  28. Which of the following is a primary responsibility of the project manager in project cost management?
    • Approving all project expenditures.
    • Developing the detailed cost estimates.
    • Ensuring the project is completed within the approved budget.
    • Negotiating contracts with vendors.
  29. What is the process of establishing the total budget for the project, including contingency reserves?
    • Estimate Costs
    • Plan Cost Management
    • Determine Budget
    • Control Costs
  30. Which of the following is a potential consequence of poor project cost management?
    • Increased team satisfaction.
    • Improved product quality.
    • Project failure due to budget overruns.
    • Enhanced communication with stakeholders.
  31. A project manager is using historical data adjusted for inflation and current market conditions to estimate costs. Which estimating technique is being used?
    • Analogous estimating
    • Parametric estimating
    • Bottom-up estimating
    • Three-point estimating
  32. What is the formula for calculating the To-Complete Performance Index (TCPI) based on the Estimate at Completion (EAC)?
    • (BAC – EV) / (EAC – AC)
    • (EAC – AC) / (BAC – EV)
    • EAC / EV
    • EAC / AC
  33. Which of the following is a key output of the Control Costs process?
    • Cost Management Plan Updates
    • Project Schedule Updates
    • Performance Reports
    • Risk Register Updates
  34. What is the purpose of trend analysis in project cost management?
    • To compare planned costs with actual costs at a specific point in time.
    • To forecast future cost performance based on past trends.
    • To determine the root causes of cost variances.
    • To allocate contingency reserves to project activities.
  35. Which of the following is NOT a typical input to the Estimate Costs process?
    • Scope Baseline
    • Project Schedule
    • Resource Calendars
    • Stakeholder Register
  36. What is the expected range of accuracy for a bottom-up estimate?
    • -5% to +10%
    • -10% to +25%
    • -25% to +75%
    • -50% to +100%
  37. Which of the following is an example of a semi-variable cost?
    • Monthly internet service with a fixed base fee and usage charges.
    • Annual insurance premium.
    • Salary of a project manager.
    • Cost of raw materials.
  38. What is the significance of the performance measurement baseline in cost management?
    • It is the original approved budget against which project performance is measured.
    • It includes management reserves for unforeseen work.
    • It is updated regularly to reflect approved scope changes.
    • It is a high-level estimate used for initial project approval.
  39. Which of the following is a tool and technique used in the Determine Budget process?
    • Reserve Analysis
    • Earned Value Analysis
    • Variance Analysis
    • Trend Analysis
  40. A project has a Budget at Completion (BAC) of $2,000,000. The Earned Value (EV) is $1,200,000 and the Actual Cost (AC) is $1,500,000. What is the Cost Performance Index (CPI)?
    • 0.8
    • 1.25
    • 0.6
    • 1.67
  41. Which of the following is a key input to the Plan Cost Management process?
    • Project Charter
    • Project Management Plan
    • Stakeholder Register
    • Risk Register
  42. What is the formula for calculating the Estimate at Completion (EAC) when future performance is expected to improve?
    • AC + ETC
    • BAC / CPI
    • AC + (BAC – EV) / CPI
    • BAC – CV
  43. Which of the following is a potential cause of scope creep and its impact on project costs?
    • Clearly defined project requirements.
    • Effective change control processes.
    • Unapproved changes to the project scope.
    • Realistic project timelines.
  44. What is the purpose of the Cost Management Plan?
    • To define the project’s objectives and deliverables.
    • To outline the processes for planning, managing, and controlling project costs.
    • To document the project’s schedule and resource requirements.
    • To describe how stakeholders will be engaged throughout the project.
  45. Which of the following is a tool used for data representation in the Control Costs process?
    • Cost Aggregation
    • Reserve Analysis
    • S-curves
    • Funding Limit Reconciliation
  46. What is the expected range of accuracy for a three-point estimate?
    • It depends on the weighting of the optimistic, pessimistic, and most likely estimates.
    • -5% to +10%
    • -25% to +75%
    • -50% to +100%
  47. Which of the following is NOT a typical type of reserve used in project cost management?
    • Contingency Reserve
    • Management Reserve
    • Schedule Reserve
    • Budget Reserve
  48. What is the significance of the Budget at Completion (BAC)?
    • It is the actual cost incurred on the project to date.
    • It is the total planned value of the work completed to date.
    • It is the total planned value of the work.
    • It is the estimated cost to complete the remaining work.
  49. Which of the following is a tool and technique used in the Estimate Costs process?
    • Cost Aggregation
    • Funding Limit Reconciliation
    • Reserve Analysis
    • Vendor Bid Analysis
  50. A project has a Budget at Completion (BAC) of $750,000. The Estimate at Completion (EAC) is $825,000. What is the Variance at Completion (VAC)?
    • $75,000
    • -$75,000
    • $1,575,000
    • -$750,000
Answers
  1. Stakeholder requirements.
  2. It uses statistical relationships between variables.
  3. Planned Value (PV)
  4. Work Performance Data
  5. BAC / CPI
  6. Earned Value Analysis
  7. Contingency reserves are for known risks, while management reserves are for unknown risks.
  8. Cost of raw materials used in production
  9. -25% to +75%
  10. Cost Aggregation
  11. -$100
  12. Basis of Estimates
  13. To define how costs will be managed throughout the project.
  14. Opportunity Costs
  15. To explain the assumptions and constraints used in cost estimates.
  16. Bottom-up estimating
  17. The project is under budget.
  18. Early identification of cost and schedule variances.
  19. Budget at Completion (BAC)
  20. Trend Analysis
  21. Investigate the reasons for the variance.
  22. Cost Estimates
  23. (Optimistic + Most Likely + Pessimistic) / 3
  24. They remain constant regardless of the level of production.
  25. To ensure that expenditures align with funding availability.
  26. Expert Judgment
  27. The project is behind schedule.
  28. Ensuring the project is completed within the approved budget.
  29. Determine Budget
  30. Project failure due to budget overruns.
  31. Analogous estimating
  32. (BAC – EV) / (EAC – AC)
  33. Performance Reports
  34. To forecast future cost performance based on past trends.
  35. Stakeholder Register
  36. -5% to +10%
  37. Monthly internet service with a fixed base fee and usage charges.
  38. It is the original approved budget against which project performance is measured.
  39. Reserve Analysis
  40. 0.8
  41. Project Charter
  42. AC + (BAC – EV) / CPI
  43. Unapproved changes to the project scope.
  44. To outline the processes for planning, managing, and controlling project costs.
  45. S-curves
  46. It depends on the weighting of the optimistic, pessimistic, and most likely estimates.
  47. Schedule Reserve
  48. It is the total planned value of the work.
  49. Vendor Bid Analysis
  50. -$75,000

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