Section 5: Cost Management

QUESTION 61
The BEST description of costs that change with the amount of production is:
A. Variable costs.
B. Fixed costs.
C. Direct costs.
D. Sunk costs.
Answer: A

Explanation:
Variable costs (choice A) change with the amount produced so choice A is the correct answer. Fixed costs (choice B) do not vary with the amount produced. Direct costs (choice C) could be either fixed or variable and thus would not be the best answer. Sunk costs (choice D) is money already spent.
Source: PMP® Exam Prep Page: 233

QUESTION 62
Project setup costs are an example of:
A. Variable costs.
B. Fixed costs.
C. Overhead costs.
D. Opportunity costs.
Answer: B
Explanation:
Setup costs do not change as production on the project changes. Therefore, they are fixed costs.
Source: PMP® Exam Prep Page: 233

QUESTION 63
Recommended corrective actions result from which of the following?
A. Cost aggregation
B. Bottom-up estimating
C. Reserve analysis
D. Control Costs
Answer: D
Explanation:
Ask yourself in what part of the process corrective action is generally done. If you have played Rita’s Process
Game in the book PMP® Exam Prep, you know it is the monitoring and controlling process group. Now determine which choice involves control, and you will select choice D.
Source: PMBOK® Guide Page: 187

QUESTION 64
All the following are components of cost management EXCEPT:
A. Vendor bid analysis.
B. Analogous estimating.
C. Earned value management.
D. Estimate Activity Resources.
Answer: D
Explanation:
Vendor bid analysis (choice A) and analogous estimating (choice B) are tools for Estimate Costs. Earned value management (choice C) is a part of performance measurement analysis in Control Costs. By the process of elimination, Estimate Activity Resources is the correct response. It is part of time management.
Source: PMBOK® Guide Page: 167

QUESTION 65
Monitoring cost expended to date in order to detect variances from the plan occurs during:
A. The creation of the cost change control system.
B. Recommending corrective actions.
C. Updating the cost baseline.
D. Project performance reviews.
Answer: D
Explanation:
Recommending corrective actions (choice B) and possible updates to the cost baseline (choice C) result from the activity described, they are not concurrent with it. Monitoring costs are part of change control, but not part of creating the change control system (choice A).
Source: PMBOK® Guide Page: 167

QUESTION 66
In which part of the cost management process is earned value (EV) used?
A. Performance measurement analysis and variance management
B. Forecasting and project performance reviews
C. Creating the cost baseline and the cost control system
D. Reserve analysis and cost aggregation
Answer: B
Explanation:
The key word here is “used.” Did you read it as “created,” and select choice A? Choices C and D occur during project planning rather than project monitoring and controlling, as described by the situation.
Source: PMP® Exam Prep Page: 240

QUESTION 67
An estimate at completion (EAC) is an output of which of the following?
A. Control Costs
B. Project performance review
C. Variance management
D. Performance measurement analysis
Answer: A
Explanation:
An estimate at completion is an output of the Control Costs process (choice A). It can be used during all of the other choices.
Source: PMP® Exam Prep Page: 248

QUESTION 68
Halfway through the executing processes of your project, a team member alerts you to a potential cost overrun for a specific deliverable. What do you do FIRST?
A. Determine the projected actual cost.
B. Implement a change control process to track the change.
C. Inform the customer.
D. Determine the cause of the overage.
Answer: D
Explanation:
A project manager must always evaluate the situation before making a decision.
Source: PMP® Exam Prep Page: 240

QUESTION 69
Which of the following BEST describes the meaning of the 50/50 rule?
A. Grant 50 percent progress on an activity when it begins and 50 percent upon completion.
B. 50 percent of the work is done by 50 percent of the people on the project.
C. Identify 50 percent of risks before you start to develop responses.
D. The project is given credit for completing 50 percent of the work when it starts.
Answer: A
Explanation:
This is a simplified way to track activity completion and, therefore earned value, rather than asking for percent complete.
Source: PMP® Exam Prep Page: 240

QUESTION 70
A cost performance index (CPI) of 0.89 means:
A. At this time, we expect the total project to cost 89 percent more than planned.
B. When the project is completed, we will have spent 89 percent more than planned.
C. The project is only progressing at 89 percent of that planned.
D. The project is only getting 89 cents out of every dollar invested.
Answer: D
Explanation:
The CPI is less than one, so the situation is bad. Choice D is the best answer.
Source: PMP® Exam Prep Page: 241