CCM Cost Management 3 — Questions and Answers
Question 1: A project's Estimate at Completion (EAC) is calculated as BAC / CPI. If BAC = $800,000 and CPI = 0.90, what is the EAC?
- $720,000
- $888,889 (Correct answer)
- $800,000
- $880,000
Correct answer: $888,889
EAC = BAC / CPI = $800,000 / 0.90 = $888,889, predicting the project will finish over budget.
Question 2: What is the primary purpose of a cost breakdown structure (CBS) in construction management?
- To identify the critical path of the project schedule
- To organize and categorize all project costs for control and reporting (Correct answer)
- To list approved subcontractors and their contract values
- To define the sequence of construction activities
Correct answer: To organize and categorize all project costs for control and reporting
A CBS hierarchically organizes all project costs, enabling systematic tracking, reporting, and control.
Question 3: Which contract type places the greatest cost risk on the owner?
- Lump sum (fixed price)
- Cost-plus with a fixed fee (Correct answer)
- Unit price contract
- Guaranteed maximum price
Correct answer: Cost-plus with a fixed fee
In a cost-plus contract, the owner pays all actual project costs plus a fee, bearing the risk that costs may be higher than anticipated.
Question 4: When performing a construction cost estimate, what does 'direct cost' typically include?
- Home office overhead and profit
- Labor, materials, equipment, and subcontractor costs directly tied to the work (Correct answer)
- Permit fees and insurance premiums
- Project management salaries for corporate staff
Correct answer: Labor, materials, equipment, and subcontractor costs directly tied to the work
Direct costs are expenses directly attributable to field construction activities, including labor, materials, equipment, and subcontractors.
Question 5: A construction manager implements a 'cost-to-complete' forecast each month. What does this metric represent?
- The total amount spent on the project to date
- The estimated remaining cost needed to finish all remaining work (Correct answer)
- The difference between budget and earned value
- The variance between planned and actual schedule progress
Correct answer: The estimated remaining cost needed to finish all remaining work
Cost-to-complete (CTC) is the forecasted cost of all remaining work, used to project final project cost.
Question 6: In value engineering during construction, what is the primary goal?
- Reducing scope to lower costs at any expense to function
- Achieving required project functions at the lowest life cycle cost (Correct answer)
- Replacing all specified materials with cheaper alternatives
- Accelerating the schedule by eliminating quality checks
Correct answer: Achieving required project functions at the lowest life cycle cost
Value engineering seeks to deliver all required functions at the lowest total cost while maintaining quality, safety, and performance.
Question 7: What is the 'To-Complete Performance Index' (TCPI) used for in earned value management?
- Measuring past cost efficiency of completed work
- Calculating the cost efficiency needed on remaining work to meet a target (Correct answer)
- Determining the schedule variance at project completion
- Estimating the number of labor hours remaining
Correct answer: Calculating the cost efficiency needed on remaining work to meet a target
TCPI = (BAC - EV) / (BAC - AC), indicating the efficiency required on remaining work to finish within the original budget.
CCM Cost Management 3
A project's Estimate at Completion (EAC) is calculated as BAC / CPI.
If BAC = $800,000 and CPI = 0.90, what is the EAC?