PMI-001 Q&A – Section 5: Cost Management (111-122)

Section 5: Cost Management

QUESTION 111
You are working for an international construction company. Your project involves pulling together over 13 different subprojects. You are having difficulty in ensuring three subcontractors are doing their work correctly.
As you review the project results you notice you have spent US $1,200,000 at the last reporting point. You know the schedule is not too bad, since your schedule performance index (SPI) is 1.1. Considering you feel you should have spent US $1,300,000 to this point, what are the cost performance index (CPI), and the schedule and cost variances?

A. 1.19, $130,000, and $230,000
B. 1.1, ($230,000), and $130,000
C. 1.19, $230,000, and ($230,000)
D. 1.43, $130,000, and ($130,000)
Answer: A
Explanation:
Be careful with these types of questions. If one item in the list is wrong, the entire answer is wrong. This is actually helpful in more quickly eliminating the wrong answers. You first need to compute EV to do the other calculations. Since your SPI is 1.1 and your PV is $1,300,000, EV = SPI x PV or 1.1 x US $1,300,000 or US $1,430,000. Since you have EV, PV, and AC, US $1,200,000, now you can compute the CPI and variances.
CPI = EV/AC = $1,430,000/$1,200,000 or 1.19; SV = EV – PV = $1,430,000 – $1,300,000 or $130,000; and CV = EV – AC = $1,430,000 – $1,200,000 or $230,000. In choice B, all of the calculations are wrong, in choice C, CPI and SV are wrong, and in choice D, CPI and CV are wrong.
Source: PMP Exam Prep Page: 241

QUESTION 112
The network expansion project you just took over is said to be doing pretty well. The previous project manager only used variances to tell the current project status. In the last report you find SV = US $50,000, CV = US $10,000, PV = US $500,000. You know the rate of spending and schedule progress are important as well. Based on the details you have been given what are the SPI and CPI?
A. 0.90, 1.02
B. 1.10, 1.02
C. 0.91, 0.98
D. 1.11, 0.98
Answer: B
Explanation:
First find EV = SV + PV = $550. Calculate SPI = EV / PV = 550 / 500 = 1.10. To find CPI you need to first calculate AC. You would use AC = EV – CV = $540. Now you can compute CPI = EV / AC = 550 / 540 = 1.02.
In answers A, C, and D the calculations are wrong, but fit if you make a computational mistake.
Source: PMP® Exam Prep Page: 241

QUESTION 113
You take over a project that is US $100,000 over budget. You know that the team has completed US $500,000 worth of work. Your sponsor has been calling all day leaving messages while you were in meetings asking for a quick update on the project status. What will you tell him when you return his call?
A. The CPI is 0.90.
B. The SPI is 1.10.
C. The CPI is 0.83.
D. The SPI is 0.83.
Answer: C
Explanation:
With the information given, you cannot calculate the SPI, so answers B and D are incorrect. Pulling the EV and CV out of the situation, you determine EV = $500,000 and CV is -$100,000. AC = EV – CV or $600,000.
Source: PMP® Exam Prep Page: 241

QUESTION 114
You are tracking your project using earned value management (EVM) and find you are behind schedule but under budget. Your variances show schedule variance (SV ) = -US $50 million, cost variance (CV) = $100 million, and your actual costs are US $500 million. What are the CPI, PV, and SPI?
A. 1.20, -$100 million, 0.92
B. 0.92, $550 million, 1.20
C. 0.92, $650 million, 1.08
D. 1.20, $650 million, 0.92
Answer: D
Explanation:
First find EV = CV + AC = $600. Calculate CPI = EV/AC = $600/$500 = 1.20. Next, to find PV, you would use the formula PV = EV – SV = $650. Now you can compute SPI = EV/PV = 600/650 = 0.923. In Answer A, PV is wrong and in answers B and C all three values are incorrect.
Source: PMP® Exam Prep Page: 241

QUESTION 115
Your assistant project manager does the monthly earned value management (EVM) analysis, but falls ill before completing it. She has provided you with the following information: cost performance index (CPI) = 1.10, actual cost (AC) = US $800 million, planned value (PV) = US $890 million. How is the project going?
A. The schedule is behind by 10 days.
B. Both the schedule and the budget are better than planned.
C. There is enough money to support an offsite team outing.
D. You have no real concerns about either schedule or budget.
Answer: D
Explanation:
Answer D is correct. You know you are under budget since the CPI is greater than one, but you don’t know by how much. You also do not know how you are doing on schedule. To find out, first calculate the EV from the data presented; EV = CPI x AC = 1.1 x $800M = $880M. Now you can determine the CV, SV, and the SPI.
CV = $880M – $800M = $80M; SV = $880M – $890M = -$10M; SPI = $880M / $890M = 0.99. Based on this information you are about on schedule and $80M under budget. Answer A is incorrect. You are behind schedule by $10M worth of work, or 1 percent of the total. Answer B is incorrect because you ARE behind schedule by a little, not ahead. Answer C is wrong since that team activity would have already been planned into the budget. We don’t use excess unless specific risk events occur which were planned for and approved in the plan.
Source: PMP® Exam Prep Page: 241

QUESTION 116
During which project management process group are budget forecasts created?
A. Monitoring and controlling
B. Planning
C. Initiating
D. Executing
Answer: A
Explanation:
Budget forecasts are an output of Control Costs, which is part of monitoring and controlling.
Source: PMP® Exam Prep Page: 238

QUESTION 117
Which of the following are ALL items included in the cost management plan?
A. The level of accuracy needed for estimates, rules for measuring cost performance, specifications for how duration estimates should be stated
B. Specifications for how estimates should be stated, rules for measuring cost performance, the level of accuracy needed for estimates
C. Rules for measuring team performance, the level of accuracy needed for estimates, specifications for how estimates should be stated
D. Specifications for how estimates should be stated, the level of risk needed for estimates, rules for measuring cost performance
Answer: B
Explanation:
Every item in choice B accurately describes a part of the cost management plan. Notice how one word in each of the other options makes the entire choice incorrect. Choice A refers to duration estimates, which are created during the time management process, choice C includes measuring team performance, a part of human resource management, and choice D includes risk.
Source: PMP® Exam Prep Page: 231

QUESTION 118
Which of the following are ALL items included in the cost management plan?
A. The level of accuracy needed for estimates, rules for measuring cost performance, specifications for how duration estimates should be stated
B. Specifications for how estimates should be stated, rules for measuring cost performance, the level of accuracy needed for estimates
C. Rules for measuring team performance, the level of accuracy needed for estimates, specifications for how estimates should be stated
D. Specifications for how estimates should be stated, the level of risk needed for estimates, rules for measuring cost performance
Answer: B
Explanation:
Every item in choice B accurately describes a part of the cost management plan. Notice how one word in each of the other options makes the entire choice incorrect. Choice A refers to duration estimates, which are created during the time management process, choice C includes measuring team performance, a part of human resource management, and choice D includes risk.
Source: PMP® Exam Prep Page: 231

QUESTION 119
Which of the following defines things the project manager needs to do regarding cost?
A. Never just accept constraints from management, periodically recalculate the estimate to complete, meet any agreed-upon estimates
B. Meet any agreed-upon estimates, estimate larger-sized work components, accept constraints from management
C. Periodically recalculate the estimate to complete, increase estimates by eliminating risks, reestimate when changes are requested
D. Never recalculate the estimate to complete, never just accept constraints from management, only use historical records for accurate estimates
Answer: A
Explanation:
The project manager should not just accept management constraints, and estimating smaller components leads to more accurate estimates, so choice B is incorrect. Eliminating risks, decreasing costs, and reestimating do not occur until a change is approved, making choice C incorrect. Choice D also includes misstatements; the estimate to complete should be updated as the project progresses, and while using historical records is a good practice, it should not be the only source of estimates.
Source: PMP® Exam Prep Page: 232

QUESTION 120
Which of the following defines things the project manager needs to do regarding cost?
A. Never just accept constraints from management, periodically recalculate the estimate to complete, meet any agreed-upon estimates
B. Meet any agreed-upon estimates, estimate larger-sized work components, accept constraints from management
C. Periodically recalculate the estimate to complete, increase estimates by eliminating risks, reestimate when changes are requested
D. Never recalculate the estimate to complete, never just accept constraints from management, only use historical records for accurate estimates
Answer: A
Explanation:
The project manager should not just accept management constraints, and estimating smaller components leads to more accurate estimates, so choice B is incorrect. Eliminating risks, decreasing costs, and reestimating do not occur until a change is approved, making choice C incorrect. Choice D also includes misstatements; the estimate to complete should be updated as the project progresses, and while using historical records is a good practice, it should not be the only source of estimates.
Source: PMP® Exam Prep Page: 229

QUESTION 121
Which of the following is the BEST thing to do at a bidder conference?
A. Answer sellers’ questions
B. Planning
C. Initiating
D. Executing
Answer: A
Explanation:
Budget forecasts are an output of Control Costs, a project monitoring and controlling process.
Source: PMP® Exam Prep Page: 238

QUESTION 122
To-complete performance index (TCPI) is represented by which of the following?
A. BAC – EV/BAC – AC
B. A measure of the value of work completed compared to the actual cost or progress
C. A measure of progress acheived compared to progress planned
D. AC + (BAC – EV)
Answer: A
Explanation:
Choice B describes the cost performance index. Choice C describes the schedule performance index. Choice
D is a formula for EAC. Choice A is the formula for TCPI and is therefore the correct response.
Source: PMP® Exam Prep Page: 242

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