Project cost
Project Cost Management Questions and Answers
1. Monitoring cost expended to date in order to detect variances from the plan occurs
during:
A. Updating the cost baseline
B. Project performance reviews
C. Recommending corrective actions
D. The creation of the cost change control system
The correct answer is B.
Recommending corrective actions and possible updates to the cost baseline result from project
performance reviews, they are not concurrent with them. Monitoring costs is part of change
control, but not part of creating the change control system. The correct choice is project
performance reviews.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 293
2. A project manager is working with management to create the project estimate. During the
initiating process group, what level of accuracy should the estimate have?
A. -35 percent to +75 percent
B. -10 percent to +25 percent
C. -25 percent to +75 percent
D. -10 percent to +10 percent
The correct answer is C.
The only estimate that is usually made in the initiating process group is the rough order of
magnitude estimate. This estimate is accurate to -25 percent to +75 percent. As the project
progresses and more is known, this estimate will be refined to a more limited range.
Knowledge Area: Cost
Process Group: Initiating
Source: PMP® Exam Prep
Page: 289
3. A project manager discovers a work package has been completed for substantially less
cost than planned. Which of the following is not among the first things to consider doing?
A. Make sure all project processes were followed.
B. Make sure the right resources were used.
C. Identify ways to increase the result.
D. Make sure all the work was done.
1|Page
,The correct answer is C.
Making sure project processes were followed, the right resources were used, and that all work
was done could point out root causes of decreased cost. You cannot find ways to increase the
result until after the root cause analysis.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 292
4. During project executing of an SAP implementation project, the forecasted remaining
hours exceed planned remaining hours. Consequently, the project will take on a negative
cost variance for the additional hours. The project manager has been asked to explain
what has occurred and what will be done to keep to the budget. Which calculation is the
project manager likely to use as a measurement tool to analyze this information?
A. EV/PV
B. EV-PV
C. EV-AC
D. BAC/CPI
The correct answer is D.
BAC/CPI is the calculation of estimate at completion (EAC). This will give a forecast of the cost
of the project based on the fact that it will need additional hours to complete the work.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 294
5. The six-month project has 300 work packages and a US $600,000 budget. Three months
into the project, 150 work packages are complete and US $300,000 has been spent.
Which of the following is correct?
A. The project manager should reevaluate cost performance but not worry about time.
B. There is not enough information.
C. The project needs 50 more work packages to be completed to be on time.
D. The project is on time and on budget.
The correct answer is B.
Half the project is done and half the cost has been expended. The answer is simple. Or is it? In
fact, you do not know what was planned, so you cannot answer this question based on the
information provided.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 292
2|Page
, 6. You are in the middle of a new product development project that has an NPV of US $10.5
million. The schedule performance index (SPI) is 0.99. There are strict rules for your
publicly traded company regarding risk, quality, and procurement. You discover the
previous project manager made a US $3 million payment that was not approved in
accordance with your company policies. Your relationship with the sponsor is strained, as
you've had to request changes because the previous project manager didn't have a
complete project management plan. The sponsor and the previous project manager are
good friends outside of work and coach your daughter’s sports team together. Luckily, the
project cost performance index (CPI) is 1.2. What should you do?
A. Ignore the payment.
B. Put the payment in an escrow account.
C. Bury the cost in the largest cost center available.
D. Contact your manager.
The correct answer is D.
Putting the payment in an escrow account or burying the cost hides it. Ignoring the payment is
not an option. Project managers must deal with potentially unethical situations like the situation
described. This payment must be brought to the attention of the project manager's manager.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 604
7. It's important in your risk-adverse organization that you are prepared to deal
appropriately with problems that may occur in the development of new consumer
products for the occupational health and safety market for various industries. You are
responsible for managing the project baselines, and you’ve helped create plans that give a
clear picture to the team of what they should do if these problems occur. There have
recently been some leadership changes, and you have been asked to present information
about your project and what you are doing with these plans. What is most likely to
happen to the allocation of funds for the plans that you created if they are not needed?
A. They are used to provide recognition and rewards for efficient work by team members.
B. They are used on the current project at the project manager’s discretion.
C. They are deleted from the project budget.
D. They are reallocated within the project by senior management.
The correct answer is C.
The question is describing risk response planning and the contingency reserves set aside to deal
with risks that might occur. When it is evident that a risk for which contingency reserves were set
aside will not occur, those funds may be deleted from the project budget and made available to
other projects in the organization.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 293
3|Page
, 8. Which of the following is an example of a parametric estimate?
A. Dollars per module
B. Bottom-up
C. CPM
D. Learning bend
The correct answer is A.
Parametric estimates use a mathematical model to predict project cost or schedule.
Knowledge Area: Cost
Process Group: Planning
Source: PMP® Exam Prep
Page: 232
9. The project management office has determined that the focus of this quarter's continuous
improvement efforts will be estimating. Which of the following is a key way to improve
activity cost estimates?
A. Base activity estimates on the upper and lower control limits.
B. Let management create the management reserve and the activity cost estimates.
C. Let the project manager create the activity cost estimates.
D. Use historical data.
The correct answer is D.
Since team members should create the activity cost estimates whenever possible, having
management or the project manager create the estimates cannot be correct. Basing activity
estimates on the control limits makes no sense. A key way to improve activity cost estimates is to
use historical data.
Knowledge Area: Cost
Process Group: Planning
Source: PMP® Exam Prep
Page: 285
10. You are having difficulty estimating the cost of a project. Which of the following best
describes the most probable cause of your difficulty?
A. Lack of historical records from previous projects
B. Unavailability of desired resources
C. Lack of company processes
D. Inadequate scope definition
The correct answer is D.
Although all choices could cause difficulty, only inadequate scope definition makes estimating
impossible.
Knowledge Area: Cost
4|Page
Project Cost Management Questions and Answers
1. Monitoring cost expended to date in order to detect variances from the plan occurs
during:
A. Updating the cost baseline
B. Project performance reviews
C. Recommending corrective actions
D. The creation of the cost change control system
The correct answer is B.
Recommending corrective actions and possible updates to the cost baseline result from project
performance reviews, they are not concurrent with them. Monitoring costs is part of change
control, but not part of creating the change control system. The correct choice is project
performance reviews.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 293
2. A project manager is working with management to create the project estimate. During the
initiating process group, what level of accuracy should the estimate have?
A. -35 percent to +75 percent
B. -10 percent to +25 percent
C. -25 percent to +75 percent
D. -10 percent to +10 percent
The correct answer is C.
The only estimate that is usually made in the initiating process group is the rough order of
magnitude estimate. This estimate is accurate to -25 percent to +75 percent. As the project
progresses and more is known, this estimate will be refined to a more limited range.
Knowledge Area: Cost
Process Group: Initiating
Source: PMP® Exam Prep
Page: 289
3. A project manager discovers a work package has been completed for substantially less
cost than planned. Which of the following is not among the first things to consider doing?
A. Make sure all project processes were followed.
B. Make sure the right resources were used.
C. Identify ways to increase the result.
D. Make sure all the work was done.
1|Page
,The correct answer is C.
Making sure project processes were followed, the right resources were used, and that all work
was done could point out root causes of decreased cost. You cannot find ways to increase the
result until after the root cause analysis.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 292
4. During project executing of an SAP implementation project, the forecasted remaining
hours exceed planned remaining hours. Consequently, the project will take on a negative
cost variance for the additional hours. The project manager has been asked to explain
what has occurred and what will be done to keep to the budget. Which calculation is the
project manager likely to use as a measurement tool to analyze this information?
A. EV/PV
B. EV-PV
C. EV-AC
D. BAC/CPI
The correct answer is D.
BAC/CPI is the calculation of estimate at completion (EAC). This will give a forecast of the cost
of the project based on the fact that it will need additional hours to complete the work.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 294
5. The six-month project has 300 work packages and a US $600,000 budget. Three months
into the project, 150 work packages are complete and US $300,000 has been spent.
Which of the following is correct?
A. The project manager should reevaluate cost performance but not worry about time.
B. There is not enough information.
C. The project needs 50 more work packages to be completed to be on time.
D. The project is on time and on budget.
The correct answer is B.
Half the project is done and half the cost has been expended. The answer is simple. Or is it? In
fact, you do not know what was planned, so you cannot answer this question based on the
information provided.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 292
2|Page
, 6. You are in the middle of a new product development project that has an NPV of US $10.5
million. The schedule performance index (SPI) is 0.99. There are strict rules for your
publicly traded company regarding risk, quality, and procurement. You discover the
previous project manager made a US $3 million payment that was not approved in
accordance with your company policies. Your relationship with the sponsor is strained, as
you've had to request changes because the previous project manager didn't have a
complete project management plan. The sponsor and the previous project manager are
good friends outside of work and coach your daughter’s sports team together. Luckily, the
project cost performance index (CPI) is 1.2. What should you do?
A. Ignore the payment.
B. Put the payment in an escrow account.
C. Bury the cost in the largest cost center available.
D. Contact your manager.
The correct answer is D.
Putting the payment in an escrow account or burying the cost hides it. Ignoring the payment is
not an option. Project managers must deal with potentially unethical situations like the situation
described. This payment must be brought to the attention of the project manager's manager.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 604
7. It's important in your risk-adverse organization that you are prepared to deal
appropriately with problems that may occur in the development of new consumer
products for the occupational health and safety market for various industries. You are
responsible for managing the project baselines, and you’ve helped create plans that give a
clear picture to the team of what they should do if these problems occur. There have
recently been some leadership changes, and you have been asked to present information
about your project and what you are doing with these plans. What is most likely to
happen to the allocation of funds for the plans that you created if they are not needed?
A. They are used to provide recognition and rewards for efficient work by team members.
B. They are used on the current project at the project manager’s discretion.
C. They are deleted from the project budget.
D. They are reallocated within the project by senior management.
The correct answer is C.
The question is describing risk response planning and the contingency reserves set aside to deal
with risks that might occur. When it is evident that a risk for which contingency reserves were set
aside will not occur, those funds may be deleted from the project budget and made available to
other projects in the organization.
Knowledge Area: Cost
Process Group: Monitoring & Controlling
Source: PMP® Exam Prep
Page: 293
3|Page
, 8. Which of the following is an example of a parametric estimate?
A. Dollars per module
B. Bottom-up
C. CPM
D. Learning bend
The correct answer is A.
Parametric estimates use a mathematical model to predict project cost or schedule.
Knowledge Area: Cost
Process Group: Planning
Source: PMP® Exam Prep
Page: 232
9. The project management office has determined that the focus of this quarter's continuous
improvement efforts will be estimating. Which of the following is a key way to improve
activity cost estimates?
A. Base activity estimates on the upper and lower control limits.
B. Let management create the management reserve and the activity cost estimates.
C. Let the project manager create the activity cost estimates.
D. Use historical data.
The correct answer is D.
Since team members should create the activity cost estimates whenever possible, having
management or the project manager create the estimates cannot be correct. Basing activity
estimates on the control limits makes no sense. A key way to improve activity cost estimates is to
use historical data.
Knowledge Area: Cost
Process Group: Planning
Source: PMP® Exam Prep
Page: 285
10. You are having difficulty estimating the cost of a project. Which of the following best
describes the most probable cause of your difficulty?
A. Lack of historical records from previous projects
B. Unavailability of desired resources
C. Lack of company processes
D. Inadequate scope definition
The correct answer is D.
Although all choices could cause difficulty, only inadequate scope definition makes estimating
impossible.
Knowledge Area: Cost
4|Page
