Question 1

The to-complete performance index is
A) the amount of funds remaining for the project.
B) the rate of performance required for the remaining work to finish the project within budget.
C) the ratio of committed costs remaining to planned costs.
D) the ratio of planned costs for the work remaining to the budgeted costs of the project.

Accepted Answer

The to-complete performance index (TCPI) is the ratio of the cost required to complete the remaining work to the remaining budget. It represents the rate of performance that must be achieved to finish the project within the budget. Option A represents the remaining funds and is not related to the TCPI. Option C represents the ratio of committed costs to planned costs, which is not directly related to the TCPI. Option D represents the ratio of planned costs for the remaining work and the budgeted cost of the project, but it does not represent the performance achieved to complete the project.

Question 2

The total budgeted cost for the project is
A) also known as the budget at completion.
B) the amount of money that exceeds the sponsor's total budgeted amount.
C) the cost of each work package in the project.
D) an aggregate of the subcontracts for the project minus the contractor's costs.

Accepted Answer

The total budgeted cost for the project is also known as the budget at completion, which represents the total amount of money that the project is expected to cost from start to finish. It includes all costs associated with completing the project, including labor, materials, and any other expenses.

Question 3

The key to effective cost control is to
A) aggressively address negative cost variances and cost inefficiencies as soon as they are identified.
B) aggressively address positive cost variances and cost inefficiencies as soon as they are identified.
C) extend the project schedule to complete the project in time.
D) all the project to continue and improve.

Accepted Answer

Effective cost control requires addressing negative cost variances and inefficiencies as soon as they are identified, as this allows for corrections to be made and prevents costs from spiraling out of control. Addressing positive cost variances may not necessarily lead to cost savings, and extending the project schedule can actually increase costs. Allowing the project to continue without addressing cost issues can also result in higher costs in the long run.

Question 4

The estimated cost of an activity should be
A) padded to include contingency funds for all conceivable issue
B) reasonable and realistic
C) conservative to cover costs
D) optimistic and without contingency

Accepted Answer

The estimated cost of an activity should be reasonable and realistic. While it's important to consider potential issues and include contingency funds, padding the estimate with all conceivable issues may lead to overestimating the cost and wasting resources. It's also important not to be too optimistic and underestimate the cost, but rather make a reasonable estimate based on past experience and available information.

Question 5

The two-step process for budgeting is
A) estimate the aggregate cost for the activity and distribute the costs over the expected time span.
B) determine the costs and add on contingency amounts.
C) examine past projects that are similar and estimate the amount for the current project.
D) determine the amount of money available from the sponsor and distribute it across the project time required.

Accepted Answer

The two-step process for budgeting involves first estimating the total cost for the project/activity and then distributing the costs over the expected time span. This allows for a more accurate budget that takes into account the entire scope of the project and the time required to complete it. The other choices may be part of the budgeting process, but they do not represent the two-step process described in the question.

Question 6

The earned value is
A) the budgeted cost of the work scheduled.
B) the sum of the actual costs of the project.
C) difference between what was planned and the actual costs.
D) the budgeted costs of the work actually performed.

Accepted Answer

The earned value is the budgeted costs of the work actually performed, which means the value of the work completed thus far. It's a key performance indicator that helps determine if a project is on track in terms of cost and schedule. Option A refers to Planned Value, Option B refers to Actual Cost, and Option C refers to Cost Variance.

Question 7

The cumulative earned value of the project is
A) the sum of the planned costs of the project
B) the sum of the budgeted costs of the work actually performed.
C) the sum of the budgeted cost of the work scheduled.
D) the sum of the differences between what was planned and the actual costs.

Accepted Answer

Cumulative earned value is the budgeted cost of the work actually performed. It represents the value of the work that has been completed so far, based on the budget that was set for it. Therefore, option B is the correct answer. Option A refers to planned costs, which do not reflect the actual progress of the project. Option C refers only to the budgeted cost of the work that was scheduled to be performed, without considering whether it was actually completed. Option D refers to variances between planned and actual costs, which are not necessarily related to the value of the work completed.

Question 8

The cumulative actual costs of a project include
A) the percentage of work expected to be completed for the time period measured.
B) the sum of the planned costs for the project.
C) the actual costs of the work performed plus the assigned portion of committed costs.
D) the total of all invoices paid for the time period measured.

Accepted Answer

The cumulative actual costs of a project include the actual costs of the work performed plus the assigned portion of committed costs.

Question 9

The forecasted cost at completion is
A) a ratio of performance to costs.
B) an estimate of the costs of the work remaining in the project.
C) the planned value of the project.
D) an estimated cost at the completion of the project based on project performance.

Accepted Answer

The forecasted cost at completion is an estimated cost at the completion of the project based on project performance. It takes into account the actual cost of work completed and an estimate of the cost of the remaining work. Therefore, option D is the correct answer. Option A refers to the cost performance index, option B refers to the estimate to complete and option C refers to the earned value of the project.

Question 10

The key to managing a cash flow is to
A) pad the price of the bid on project proposals to cover contingencies.
B) add a sizable profit to the proposal after estimating direct and indirect costs.
C) optimistically plan the budget to win more contracts.
D) ensure that cash comes in faster than it goes out.

Accepted Answer

Managing cash flow means ensuring that more cash is coming in than going out. This can be achieved by invoicing promptly and following up on payments, negotiating favorable payment terms with suppliers, monitoring and controlling expenses, and forecasting cash flow to plan for any potential shortfalls. Padding the price or adding excess profit margins can actually deter clients and reduce the chances of winning contracts. Similarly, optimistic budget planning can leave the business vulnerable to unexpected expenses and cash flow issues.

Question 11

The cumulative budgeted cost is
A) the aggregate estimated costs of all the activities.
B) the amount budgeted to accomplish the work scheduled to a point in time in the project.
C) the committed costs for an activity.
D) the sum of all the funds expended to a point in time in the project.

Accepted Answer

The cumulative budgeted cost refers to the amount of money budgeted to complete the work scheduled up to a point in time in the project. It is not the aggregate estimated costs of all activities (A), the committed costs for an activity (C), or the sum of all funds expended (D).

Question 12

The actual cost on a project is
A) the planned amount to be spent on the project plus unexpected costs
B) the sum of the budgeted costs.
C) the amount of funds expended on the project.
D) the total of the unexpected costs.

Accepted Answer

The actual cost on a project is the real amount of funds expended on the project. It is not the planned amount, the sum of budgeted costs, or only the unexpected costs.

Question 13

If the project has a negative cost variance, then
A) no action is needed to be taken, the project is performing well.
B) the project should be watched to be sure the project progresses.
C) more money needs to be expended on the project
D) correction actions should be taken on activities that are near-term and have large estimated costs.

Accepted Answer

A negative cost variance indicates that the project is over budget and corrective actions need to be taken to bring the project back on track. Priority should be given to activities that are near-term and have large estimated costs to minimize the impact of the cost variance. Simply watching the project progress or expending more money on the project will not solve the problem.

Question 14

The positive cost variance means
A) more money was spent on the project than was planned.
B) more money was spent on the project than the value of the work performed.
C) less money was spent on the project than the value of the work performed.
D) less money was spent on the project than was planned.

Accepted Answer

A positive cost variance indicates that the project spent less money than the value of the work performed, suggesting a favorable financial performance.

Question 15

For a project, the TBC = $200,000, the CEV = $120,000, the CAC = $100,000.Which of the following statements is true?
A) The project has a negative cost variance and corrective action is needed.
B) The FCAC is greater than the budget and the project scope should be adjusted.
C) The project is progressing well and should be continued.
D) The CPI is less than 1.0.

Accepted Answer

The project is progressing well and should be continued.

Question 16

The key to managing ____ is to ensure that cash comes in faster than it goes out.
A) scope extensions
B) budget & schedule charts
C) cash flow
D) cash variances

Accepted Answer

Cash flow refers to the amount of cash coming in and going out of a business. The key to managing cash flow is to ensure that more cash comes in than goes out, which can be done by improving collections from customers, reducing expenses, and managing inventory levels. By focusing on cash flow, businesses can ensure that they have enough cash on hand to cover expenses and invest in growth opportunities.

Question 17

A cost performance index greater than 1.0 means
A) for every dollar spent on the project, more than one dollar of earned value was received
B) for every dollar of earned value received, more than one dollar was spent on the project
C) corrective action should be taken on the project.
D) the total actual costs exceed the total budgeted costs

Accepted Answer

A cost performance index greater than 1.0 means that for every dollar spent on the project, more than one dollar of earned value was received, indicating that the project is performing better than planned in terms of cost.

Question 18

The first method for determining ____ assumes that the work to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far.
A) forecasted cost at completion
B) cumulative actual cost
C) cumulative earned value
D) cost performance index

Accepted Answer

The first method for determining forecasted cost at completion assumes that the work to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far. It is a commonly used method in project management for forecasting the final cost of a project.

Question 19

Committed costs in a project are
A) those costs budgeted for the scheduled activities.
B) planned value of the project.
C) budgeted costs of the work scheduled.
D) the amounts that have been obligated or encumbered for materials, equipment, or services.

Accepted Answer

Committed costs refer to the amounts that have already been allocated or set aside for materials, equipment, or services, and have been earmarked for expenditure. These costs are also referred to as obligated or encumbered costs. They are considered fixed costs as they cannot be changed once the commitment has been made. Options A, B, and C refer to other types of costs.

Question 20

The cost performance analysis should include identifying those work packages that have a negative cost variance or a cost performance index of less than ____.
A) 0.0
B) 1.0
C) 5.0
D) 100.0

Accepted Answer

The cost performance index (CPI) is calculated by dividing earned value (EV) by actual cost (AC), CPI=EV/AC. A CPI of less than 1.0 indicates that the project is over budget, so option B is the best choice which indicates the work packages with a CPI of less than 1.0.

Quiz 7: Determining Costs, Budget and Earned Value

The to-complete performance index is

The total budgeted cost for the project is

The key to effective cost control is to

The estimated cost of an activity should be

The two-step process for budgeting is

The earned value is

The cumulative earned value of the project is

The cumulative actual costs of a project include

The forecasted cost at completion is

The key to managing a cash flow is to

The cumulative budgeted cost is

The actual cost on a project is

If the project has a negative cost variance, then

The positive cost variance means

For a project, the TBC = $200,000, the CEV = $120,000, the CAC = $100,000.Which of the following statements is true?

The key to managing ____ is to ensure that cash comes in faster than it goes out.

A cost performance index greater than 1.0 means

The first method for determining ____ assumes that the work to be performed on the remaining portion of the project or work package will be done at the same rate of efficiency as the work performed so far.

Committed costs in a project are

The cost performance analysis should include identifying those work packages that have a negative cost variance or a cost performance index of less than ____.