Financial Management for Project Managers Performance Measurement in Accounting 2 — Questions and Answers
Question 1: A project has a Budget at Completion (BAC) of $500,000, Earned Value (EV) of $200,000, and Actual Cost (AC) of $250,000. What is the Cost Performance Index (CPI)?
- 0.80 (Correct answer)
- 1.25
- 0.40
- 1.00
Correct answer: 0.80
CPI = EV / AC = $200,000 / $250,000 = 0.80, indicating the project is over budget.
Question 2: Which performance measurement baseline integrates scope, schedule, and cost to provide a unified project control baseline?
- Performance Measurement Baseline (PMB) (Correct answer)
- Cost Baseline
- Schedule Baseline
- Scope Baseline
Correct answer: Performance Measurement Baseline (PMB)
The Performance Measurement Baseline (PMB) integrates scope, schedule, and cost for unified project control.
Question 3: A project's Schedule Performance Index (SPI) is 1.15. What does this indicate?
- The project is ahead of schedule (Correct answer)
- The project is behind schedule
- The project is over budget
- The project is under budget
Correct answer: The project is ahead of schedule
An SPI greater than 1.0 means EV exceeds PV, indicating the project is progressing faster than planned.
Question 4: In Earned Value Management, what does Planned Value (PV) represent?
- The authorized budget assigned to scheduled work (Correct answer)
- The value of work actually completed
- The actual cost incurred for work performed
- The estimated cost to complete remaining work
Correct answer: The authorized budget assigned to scheduled work
Planned Value (PV) is the authorized budget assigned to the work scheduled to be completed by a given point in time.
Question 5: A project manager uses the formula EAC = BAC / CPI to calculate the Estimate at Completion. When is this formula most appropriate?
- When current variances are expected to continue throughout the project (Correct answer)
- When the original estimate was fundamentally flawed
- When remaining work will be performed at the planned rate
- When the project has a fixed deadline
Correct answer: When current variances are expected to continue throughout the project
EAC = BAC / CPI is used when current cost performance trends are expected to persist for the remainder of the project.
Question 6: What is the To-Complete Performance Index (TCPI) formula based on the original BAC?
- (BAC - EV) / (BAC - AC) (Correct answer)
- (EV - AC) / BAC
- (BAC - AC) / EV
- (PV - EV) / (BAC - AC)
Correct answer: (BAC - EV) / (BAC - AC)
TCPI = (BAC - EV) / (BAC - AC) measures the cost efficiency needed to meet the original budget target.
Question 7: A project shows a Cost Variance (CV) of -$40,000. What does this mean for the project?
- The project is over budget by $40,000 (Correct answer)
- The project is under budget by $40,000
- The project is behind schedule by $40,000 worth of work
- The project will be completed $40,000 early
Correct answer: The project is over budget by $40,000
CV = EV - AC; a negative CV means actual costs exceeded the value of work performed, indicating an over-budget condition.
Financial Management for Project Managers Performance Measurement in Accounting 2
A project has a Budget at Completion (BAC) of $500,000, Earned Value (EV) of $200,000, and Actual Cost (AC) of $250,000.
What is the Cost Performance Index (CPI)?