PMBOK PMBOK Project Cost Management Questions and Answers 1 — Questions and Answers
Question 1: What is the primary purpose of the Plan Cost Management process in PMBOK?
- To approve the project budget
- To define how project costs will be estimated, budgeted, managed, and controlled (Correct answer)
- To calculate the earned value of completed work
- To identify and analyze project cost risks
Correct answer: To define how project costs will be estimated, budgeted, managed, and controlled
Plan Cost Management establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs.
Question 2: Which cost estimating technique breaks down deliverables into smaller components and estimates cost at the work package level?
- Analogous estimating
- Parametric estimating
- Bottom-up estimating (Correct answer)
- Three-point estimating
Correct answer: Bottom-up estimating
Bottom-up estimating decomposes work into individual components, estimates cost for each, then aggregates them upward to the total project cost.
Question 3: What is the Budget at Completion (BAC) in cost management?
- The total actual cost spent at project completion
- The approved total budget for all project work (Correct answer)
- The forecasted cost to complete the remaining work
- The difference between earned value and actual cost
Correct answer: The approved total budget for all project work
Budget at Completion (BAC) is the total approved budget for all the work in the project, representing what the project was expected to cost.
Question 4: A cost estimate expressed as a range such as -25% to +75% is known as a:
- Definitive estimate
- Rough order of magnitude (ROM) estimate (Correct answer)
- Parametric estimate
- Control account estimate
Correct answer: Rough order of magnitude (ROM) estimate
A Rough Order of Magnitude (ROM) estimate, used in early project phases, typically has an accuracy range of -25% to +75% due to limited information.
Question 5: Which PMBOK process produces the Cost Baseline?
- Plan Cost Management
- Estimate Costs
- Determine Budget (Correct answer)
- Control Costs
Correct answer: Determine Budget
The Determine Budget process aggregates estimated costs of individual activities to establish the authorized cost performance baseline (Cost Baseline).
Question 6: What does the term 'sunk cost' mean in project cost management?
- Costs that are reserved for unplanned risks
- Costs that have already been incurred and cannot be recovered (Correct answer)
- Costs associated with scope changes
- Variable costs that change with project activity levels
Correct answer: Costs that have already been incurred and cannot be recovered
Sunk costs are past expenditures that have already been incurred and cannot be recovered, and PMBOK advises they should not influence future project decisions.
PMBOK PMBOK Project Cost Management Questions and Answers 1
What is the primary purpose of the Plan Cost Management process in PMBOK?