PMI-001 Q&A – Section 5: Cost Management (101-110)

Section 5: Cost Management

A trend report was given to the project manager, who reacted to the report by investigating what activity or activities had not been done, but should have been done, to date. What did the report show?
A. Actual cost was below planned and schedule progress was less than planned.
B. The cost performance index (CPI) was 0.8 and the schedule performance index (SPI) was 1.2.
C. The budget at completion (BAC) was higher than planned.
D. The schedule performance index (SPI) was 1.3 and the estimate at completion (EAC) was greater than planned.
Answer: A

You should ask yourself which of the choices would be interepreted to mean that work was not done. A schedule performance index (SPI) of less than 1 could mean that work was not done, but there could be other reasons. When you combine cost and schedule you can clearly see that the reason the project has progressed more slowly than planned is probably due to work not getting done. This makes choice A the best choice.
Source: PMP® Exam Prep Page: 241

What would be the BEST explanation for the following: Both the cost variance and schedule variance are negative, but the cost variance is lower than the schedule variance.
A. The project underspent because all work was not completed, but overspent for work that was done.
B. The project overspent due to increased costs and yet completed some activities faster.
C. The project activities took longer than expected, but costs were lower.
D. The project underspent, because costs were lower than planned and activities were easier to complete than planned.
Answer: A
Remember that for variances, negative is bad. In this situation, both the variances are negative. To answer the question, first look for which one of the four choices exhibits negative variances for both cost and schedule. Choice B exhibits negative variance for cost and positive variance for schedule. Choice C exhibits positive variance for cost and negative variance for schedule. Choice D exhibits positive variances for both.
Only choice A exhibits both cost and schedule variances as negative.
Source: PMP® Exam Prep Page: 241

A project has a team member assigned to the project full time. What is the MOST likely effect on the project if that resource completes her activity sooner than planned?
A. Lower quality deliverables
B. Wasted cost
C. A subsequent activity will be delayed
D. Changes to the risk response plan
Answer: B
A full-time team member who completes her work sooner than planned could be forced to wait for the start of her next activity. Since she is full time, she would have to be paid for time not working.
Source: PMP® Exam Prep Page: 241

Calculating estimate to complete (ETC) is done during the:
A. Planning process group.
B. Initiating process group.
C. Executing process group.
D. Monitoring and controlling process group.
Answer: D
Calculating estimate to complete is done as part of the monitoring and controlling process group.
Source: PMP® Exam Prep Page: 241

A project is over budget to date. Which of the following is NOT a reason this could have occurred?
A. More work than planned was accomplished.
B. There was a cost increase from the supplier.
C. Work was delayed.
D. Work was done inefficiently.
Answer: C
If work was planned but not done at the time it was scheduled to be completed, funds allocated for that cost would remain unspent, making the project under budget until the work is completed and paid for. It is possible that making up for the work not being done on time could result in the need to crash the project or work overtime, in which case the project could later end up over budget for the activity.
Source: PMP® Exam Prep Page: 241

The difference between the cost baseline and the cost budget can be BEST described as:
A. The management reserve.
B. The contingency reserve.
C. The project cost estimate.
D. The cost account.
Answer: A
Cost accounts are included in the project cost estimate, and the contingency reserve is added to that to come up with the cost baseline. Thereafter, the management reserve is added to come up with the cost budget.
Therefore, only choice A is correct.
Source: PMP® Exam Prep Page: 237

Which of the following is the LEAST effective way to influence the factors that create changes to the cost baseline?
A. Review the project scope with the functional manager responsible for the greatest number of requested changes.
B. Explain to those requesting changes the negative impact of change to the project.
C. Eliminate the scope causing the most changes.
D. Notify all stakeholders that no more changes will be allowed.
Answer: D
Saying “No more changes” is not likely to be effective. All the other choices could be done.
Source: PMP® Exam Prep Page: 238

A seller submits an invoice that is outside the funding limit reconciliation completed during project planning.
What is the LEAST likely cause?
A. An activity has taken longer to complete than planned.
B. The critical path was fast tracked during project planning.
C. Equipment was received earlier than planned.
D. There was a cost increase to the successor activity of a critical path activity.
Answer: B
Final funding limit reconciliation would have been done after fast tracking.
Source: PMBOK® Guide Page: 178

What is the definition of chart of accounts?
A. A list of all the buyers a seller works for
B. Another name for a chartered accountant
C. A document where risks are described
D. Allowable places to charge expenses
Answer: D
A chart of accounts is used to determine where each project cost should be recorded to better enable cost analysis on a project.
Source: PMBOK® Guide Page: 353

Your boss is worried about the project schedule. There is a critical deliverable due to the federal government in two weeks. If you miss the deliverable, you could lose the entire contract. To help reduce the boss’s stress you show him the earned value calculations you just completed. They show your cost performance index
(CPI) is 1.25, your actual cost (AC) is US $400 million, and your planned value (PV) is US $490 million. Should your boss be comfortable?
A. Yes, your SV is $10 million.
B. No, your CPI is too high.
C. He needs more data.
D. Yes, your SPI is 1.05.
Answer: C
You may have chosen answer A. Although the SV is $10 million, this does not indicate that all the activities are proceeding on schedule. You will need to find out if the activities leading up to the critical deliverable are on schedule to comfort your boss. Remember that earned value management (EVM) is a way to discover trends or indications of the way the project is going. You need to examine the details to be sure. Answer B is incorrect because you cannot determine schedule problems based on the CPI. Answer D is incorrect; the SPI is 1.02 not 1.05, but also for the same reason as answer A. To find SV and SPI you must first find EV. EV = CPI x AC = 1.25 x $400M = $500M. So SV = EV – PV = $500M – $490M = $10M and SPI = EV / PV = $500M / $490M = 1.020 (use 3-decimal place accuracy).
Source: PMP® Exam Prep Page: 241