PMP Managing Budget and Costs 2 — Questions and Answers
Question 1: A project has a BAC of $500,000, EV of $200,000, and AC of $250,000. What is the Cost Performance Index (CPI)?
- 0.80 (Correct answer)
- 1.25
- 0.60
- 1.00
Correct answer: 0.80
CPI = EV / AC = $200,000 / $250,000 = 0.80, meaning only $0.80 of value is earned for every $1 spent.
Question 2: Which cost estimation technique uses statistical relationships between historical data and project variables to calculate cost estimates?
- Analogous estimating
- Parametric estimating (Correct answer)
- Bottom-up estimating
- Three-point estimating
Correct answer: Parametric estimating
Parametric estimating uses statistical relationships (e.g., cost per unit) derived from historical data to calculate estimates.
Question 3: A project manager notices the CPI has been consistently 0.75 for the past three months. What is the most likely Estimate at Completion (EAC)?
- EAC = BAC / CPI (Correct answer)
- EAC = AC + ETC
- EAC = AC + (BAC - EV)
- EAC = BAC - EV
Correct answer: EAC = BAC / CPI
When the CPI is expected to remain the same, EAC = BAC / CPI is the most appropriate formula.
Question 4: What does a negative Cost Variance (CV) indicate about a project?
- The project is ahead of schedule
- The project is under budget
- The project is over budget (Correct answer)
- The project has completed more work than planned
Correct answer: The project is over budget
A negative CV (EV - AC < 0) means actual costs exceed earned value, indicating the project is over budget.
Question 5: A project manager is asked to provide a rough order of magnitude (ROM) estimate. What is the typical accuracy range for a ROM estimate?
- -10% to +10%
- -25% to +75% (Correct answer)
- -5% to +10%
- -50% to +100%
Correct answer: -25% to +75%
ROM estimates are typically accurate within -25% to +75% and are used in the early phases of a project.
Question 6: Which process involves monitoring the status of the project to update the project costs and managing changes to the cost baseline?
- Estimate Costs
- Determine Budget
- Control Costs (Correct answer)
- Plan Cost Management
Correct answer: Control Costs
Control Costs is the process of monitoring project status to update costs and managing changes to the cost baseline.
Question 7: A project has EV = $300,000, PV = $350,000, and AC = $280,000. Which statement is correct?
- The project is over budget and ahead of schedule
- The project is under budget but behind schedule (Correct answer)
- The project is over budget and behind schedule
- The project is under budget and ahead of schedule
Correct answer: The project is under budget but behind schedule
CV = EV - AC = $20,000 (positive = under budget); SV = EV - PV = -$50,000 (negative = behind schedule).
PMP Managing Budget and Costs 2
A project has a BAC of $500,000, EV of $200,000, and AC of $250,000.
What is the Cost Performance Index (CPI)?