PMI-001 Q&A – Section 5: Cost Management (71-80)

Section 5: Cost Management

QUESTION 71
What does estimate at completion (EAC) mean?
A. Each anticipated cost for the project
B. Estimated average cost at project completion
C. Anticipated total cost at project completion
D. Anticipated expenses at project completion
Answer: C

Explanation:
EAC means the total cost of the project at completion, based on current information
Source: PMP® Exam Prep Page: 241

QUESTION 72
The BEST method to control costs is to:
A. Estimate at the beginning of the project and then check costs against the baseline.
B. Estimate during the execution of the project and then manage each activity to the budget.
C. Estimate during planning and then reestimate before each activity begins.
D. Estimate during the initiation of the project and have management confirm the estimates.
Answer: A
Explanation:
This question focuses on how to control costs, not estimating. Choice B deals with scope, choices C and D deal with estimating only.
Source: PMP® Exam Prep Page: 241

QUESTION 73
Which type of cost is team training?
A. Direct
B. NPV
C. Indirect
D. Fixed
Answer: A
Explanation:
You are training the team on skills required for the project. The cost is directly related to the project and thus a direct cost.
Source: PMP® Exam Prep Page: 233

QUESTION 74
One common way to compute estimate at completion (EAC) is to take the budget at completion (BAC) and:
A. Divide by SPI.
B. Multiply by SPI.
C. Multiply by CPI.
D. Divide by CPI.
Answer: D
Explanation:
This question is asking for the formula for EAC, which is BAC/CPI. Notice how you will have to remember the formula to get the answer correct.
Source: PMP® Exam Prep Page: 242

QUESTION 75
If earned value (EV) is US $300,000, actual cost (AC) is US $350,000, and planned value (PV) is US $375,000, what does the schedule performance index (SPI) indicate?
A. You are only progressing at 86 percent of the rate originally planned.
B. You are progressing at 125 percent of the rate originally planned.
C. You are progressing at 116 percent of the rate originally planned.
D. You are only progressing at 80 percent of the rate originally planned.
Answer: D
Explanation:
Schedule performance index is computed by EV/PV = 300,000/375,000 = 0.8. This means that you are progressing at a rate of 80 percent of what you planned.
Source: PMP® Exam Prep Page: 241

QUESTION 76
A project team budgeted US $3,000 for the work performed and has spent US $4,000, to date. If they budgeted US $5,000 for the work scheduled, what is the cost variance (CV)?
A. ($1,000)
B. $2,000
C. $1,000
D. ($2,000)
Answer: A
Explanation:
A question like this is the reason you need to understand what each term means in common terminology. EV is $3,000, AC is $4,000, so cost variance is $3,000 – $4,000 = ($1,000).
Source: PMP® Exam Prep Page: 241

QUESTION 77
Value analysis is performed to get:
A. More value from the cost analysis.
B. Management to buy into the project.
C. The team to buy into the project
D. A less costly way of doing the same work.
Answer: D
Explanation:
Notice that you need to know the definition of value analysis to answer this question. Also notice that the other choices could be considered correct by someone who does not know the definition.
Source: PMP® Exam Prep Page: 232

QUESTION 78
Your company is undergoing a change in ownership and the new owners are looking at the total cost of a new product. Which of the following would BEST provide that information?
A. Estimate at completion
B. Life cycle cost
C. Earned value
D. Net present value
Answer: B
Explanation:
The life cycle cost will provide the picture of the total cost of the project. It includes project costs and operations and maintenance costs.
Source: PMP® Exam Prep Page: 231

QUESTION 79
A project manager wants to decrease costs on a project that a consultant is completing for her company.
What costs should the project manager consider to accomplish this?
A. Variable and fixed
B. Variable and direct
C. Fixed and indirect
D. Direct and indirect
Answer: B
Explanation:
The variable and direct costs are most affected by the size and scope of the project. Indirect costs are usually computed as a percentage of direct costs.
Source: PMP® Exam Prep Page: 233

QUESTION 80
A project manager has run into cost difficulties. The project scope must be completed, but at less cost. The project manager should:
A. Change the depreciation method for the equipment used on the project.
B. Perform a value analysis.
C. Evaluate benefit cost ratios.
D. Recover some sunk costs.
Answer: B
Explanation:
How can changing the depreciation (choice A) affect the total cost of the project? A benefit cost ratio (choice C) is too vague to help eliminate specific project costs. Sunk costs (choice D) are expended costs and can never be recovered.
Source: PMP® Exam Prep Page: 232

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