PMBOK PMBOK Project Cost Management Questions and Answers 2 — Questions and Answers
Question 1: What is the Cost Performance Index (CPI) formula and what does a CPI of 0.85 indicate?
- CPI = PV/AC; the project is over budget
- CPI = EV/AC; for every dollar spent, only $0.85 of value is being produced (over budget) (Correct answer)
- CPI = AC/EV; the project is under budget
- CPI = EV/PV; the project is behind schedule
Correct answer: CPI = EV/AC; for every dollar spent, only $0.85 of value is being produced (over budget)
CPI = EV/AC; a value of 0.85 means only 85 cents of planned value is being realized for every dollar actually spent, indicating the project is over budget.
Question 2: Which cost management concept refers to an approved change to the cost baseline?
- Cost variance
- Management reserve
- Re-baselining (Correct answer)
- Control account
Correct answer: Re-baselining
Re-baselining involves formally approving changes to the cost baseline, which should only occur in response to authorized scope changes.
Question 3: What is the Estimate to Complete (ETC) in Earned Value Management?
- The total project budget minus actual cost to date
- The expected cost to finish the remaining project work (Correct answer)
- The original budget minus cost variance
- The sum of actual cost and management reserve
Correct answer: The expected cost to finish the remaining project work
Estimate to Complete (ETC) is the expected cost needed to finish all the remaining project work, calculated as EAC minus AC.
Question 4: What is the difference between direct costs and indirect costs in project cost management?
- Direct costs are variable; indirect costs are fixed
- Direct costs are attributable to a specific project; indirect costs are shared across multiple projects or the organization (Correct answer)
- Direct costs are labor only; indirect costs cover materials
- Direct costs are budgeted; indirect costs are unplanned
Correct answer: Direct costs are attributable to a specific project; indirect costs are shared across multiple projects or the organization
Direct costs are directly attributable to a specific project (e.g., team salaries, materials), while indirect costs are overhead shared across projects (e.g., utilities, administrative staff).
Question 5: Which formula is used to calculate the To-Complete Performance Index (TCPI) based on Budget at Completion (BAC)?
- TCPI = (BAC - EV) / (BAC - AC) (Correct answer)
- TCPI = EV / AC
- TCPI = (BAC - AC) / EV
- TCPI = EV / PV
Correct answer: TCPI = (BAC - EV) / (BAC - AC)
TCPI = (BAC - EV) / (BAC - AC) measures the required cost performance to complete remaining work within the original budget.
Question 6: Cost aggregation in the Determine Budget process means:
- Breaking the total budget into work packages for tracking
- Rolling up work package cost estimates by WBS level to establish the project budget (Correct answer)
- Assigning contingency reserves to individual activities
- Comparing planned costs to actual expenditures
Correct answer: Rolling up work package cost estimates by WBS level to establish the project budget
Cost aggregation sums up work package estimates up through the WBS hierarchy to determine the total project budget at each level.
PMBOK PMBOK Project Cost Management Questions and Answers 2
What is the Cost Performance Index (CPI) formula and what does a CPI of 0.85 indicate?