PSI Project and Financial Management 2 — Questions and Answers
Question 1: A project manager calculates the Cost Performance Index (CPI) as 0.85. What does this indicate?
- The project is 15% under budget
- The project is getting $0.85 in value for every $1 spent (Correct answer)
- The project will finish 15% ahead of schedule
- The project has 85% of its budget remaining
Correct answer: The project is getting $0.85 in value for every $1 spent
A CPI of 0.85 means the project is over budget, earning only $0.85 of planned value for each dollar spent.
Question 2: Which scheduling technique uses probabilistic time estimates including optimistic, pessimistic, and most likely durations?
- Critical Path Method (CPM)
- Gantt Chart
- Program Evaluation and Review Technique (PERT) (Correct answer)
- Resource Leveling
Correct answer: Program Evaluation and Review Technique (PERT)
PERT uses three-point estimates (optimistic, pessimistic, most likely) to account for uncertainty in activity durations.
Question 3: What is the primary purpose of a Work Breakdown Structure (WBS)?
- To assign team roles and responsibilities
- To decompose project deliverables into manageable work packages (Correct answer)
- To track project expenditures
- To schedule project activities in sequence
Correct answer: To decompose project deliverables into manageable work packages
A WBS hierarchically decomposes project scope into smaller, manageable deliverables and work packages.
Question 4: A project has a Budget at Completion (BAC) of $200,000, Earned Value (EV) of $80,000, and Actual Cost (AC) of $100,000. What is the Estimate at Completion (EAC) using the CPI?
- $220,000
- $250,000 (Correct answer)
- $280,000
- $300,000
Correct answer: $250,000
EAC = BAC / CPI = $200,000 / (80,000/100,000) = $200,000 / 0.8 = $250,000.
Question 5: Which type of project dependency exists when one task cannot start until another has finished?
- Start-to-Start (SS)
- Finish-to-Start (FS) (Correct answer)
- Start-to-Finish (SF)
- Finish-to-Finish (FF)
Correct answer: Finish-to-Start (FS)
A Finish-to-Start dependency means the successor activity cannot begin until the predecessor has completed.
Question 6: What does 'scope creep' refer to in project management?
- Gradual unauthorized expansion of project scope without corresponding adjustments to resources or schedule (Correct answer)
- A formal process for approving scope changes
- Reduction in project deliverables due to budget cuts
- The natural narrowing of scope as a project matures
Correct answer: Gradual unauthorized expansion of project scope without corresponding adjustments to resources or schedule
Scope creep is the uncontrolled expansion of project scope without corresponding changes to time, cost, or resources.
Question 7: In risk management, what is the difference between risk mitigation and risk avoidance?
- Mitigation eliminates risk; avoidance reduces its impact
- Avoidance eliminates the risk entirely; mitigation reduces probability or impact (Correct answer)
- They are interchangeable terms
- Avoidance is used for low risks; mitigation for high risks
Correct answer: Avoidance eliminates the risk entirely; mitigation reduces probability or impact
Risk avoidance eliminates the threat by changing the plan, while mitigation reduces the probability or impact of a risk.
PSI Project and Financial Management 2
A project manager calculates the Cost Performance Index (CPI) as 0.85.
What does this indicate?