Managing Budget and Costs Flashcards

A project has a BAC of $500,000, EV of $200,000, and AC of $250,000. What is the Cost Performance Index (CPI)?

Answer: 0.80

CPI = EV / AC = $200,000 / $250,000 = 0.80, meaning only $0.80 of value is earned for every $1 spent.

Which cost estimation technique uses statistical relationships between historical data and project variables to calculate cost estimates?

Answer: Parametric estimating

Parametric estimating uses statistical relationships (e.g., cost per unit) derived from historical data to calculate estimates.

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)?

Answer: EAC = BAC / CPI

When the CPI is expected to remain the same, EAC = BAC / CPI is the most appropriate formula.

What does a negative Cost Variance (CV) indicate about a project?

Answer: The project is over budget

A negative CV (EV - AC < 0) means actual costs exceed earned value, indicating the project is over budget.

A project manager is asked to provide a rough order of magnitude (ROM) estimate. What is the typical accuracy range for a ROM estimate?

Answer: -25% to +75%

ROM estimates are typically accurate within -25% to +75% and are used in the early phases of a project.

Which process involves monitoring the status of the project to update the project costs and managing changes to the cost baseline?

Answer: Control Costs

Control Costs is the process of monitoring project status to update costs and managing changes to the cost baseline.

A project has EV = $300,000, PV = $350,000, and AC = $280,000. Which statement is 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).