COST MANAGEMENT

PMP Practice Questions

1) If the CPI of a project is 1.15 and the SPI is 0.7, which of the following techniques
would probably help you bring the SPI closer to 1?

A) Rolling Wave Planning

B) Reserve Analysis

C) Crashing

D) Funding Limit Reconciliation

2) Suppose you have a budgeted cost of a project at $900,000. The project is to be

completed in 9 months. After a month, you have completed 10% of the project at a
total expense of $100,000. The planned completion should have been 15%. At the
current progress rate, how much more money is required to complete the project?

A) $ 800,000

B) $ 900,000

C) $ 1,000,000

D) $ 1,100,000

3) For you project, you have hired a freelancer to develop a website in .NET. After a
month, you decide that the freelancer isn’t doing a good job and reach out to another
freelancer. The second freelancer convinces you that your website project would be
better off based on the Java platform. The costs associated with the .NET developer
are:

A) Variable

B) Direct

C) Indirect

D) Sunk

4) If you use the Funding Limit Reconciliation technique while performing the
Determine Budget process, which of the following will NOT change?

A) Activity Cost Estimates

B) Schedule

C) Resources required during an Iteration

D) Planned scope to be delivered in a Sprint

5) Suppose you are managing a software development project. The project is expected
to be completed in 8 months at a cost of $10000 per month. After 2 months, you
realize that the project is 30% completed at a cost of $40,000. What is the Earned
Value (EV) and the Cost Variance (CV)?

A) EV = $24,000; CV= ($16,000)

B) EV = ($20,000); CV= $16,000

C) EV = $16,000; CV= ($4,000)

D) EV = ($16,000) ; CV= $4,000

6) To protect your project from cost overruns, which of the following can you do in
the planning phase of the project?

A) Pad high risk activities with extra cost buffer

B) Provide extra time for each activity in the schedule

C) Monitor each activity closely

D) Apply Earned Value Forecasting Formulae, such EAC and ETC

7) When a product is recalled, the ____ increases.

A) Activity Cost

B) Cost of Quality

C) Product Quality

D) Product Maintenance Cost

8) View the Precedence Diagram below.

One of the activities in the project is to procure wood. You, however, have decided to
use Wood Plastic Composites (WPC) because they are more environmentally
friendly, more durable, and require less maintenance compared to solid treated wood.
As you want the shed to last many years, low maintenance is a key factor while
choosing the material. This is an example of using _________ to make an informed
decision.

A) Cost of Quality

B) Direct Costs
C) Costing associated with Leads and Lags

D) Life-Cycle Costing

ANSWERS
1) Since the CPI is over one and SPI is less than one, it means that the project is
currently not over budget, but is behind schedule. Rolling Wave planning does not
impact the schedule. It is a type of planning used when there isn’t enough clarity to
plan for the complete project. Options B and D are techniques used in the Determine
Budget process. Option C, Crashing, is used to accelerate project progress at the
expense of increased cost and risk. For more information, read the When to Crash or
Compress a Schedule article.

2) The question is indirectly asking you to compute the Estimate to Complete (ETC).
For the worked out solution, read the Examples of Project Forecasting Computations
article.

3) Since you have been convinced to go with the Java platform, all of the .NET
related code cannot be used. Therefore, this is an example of sunk costs. For more
information, read the Example of Costs in Project Management article.

4) Funding Limit Reconciliation can lead to changes in schedule and resources

required. As schedule is being changed so can the expected scope in an Iteration.
Activity Cost Estimates are NOT based on Funding Limits. Therefore, Option A is the
only valid answer. Read the Techniques for Determining a Project Cost Budget
article.

5) For the worked out solution, read the Examples of Cost Variance (CV) and
Schedule Variance (SV) in a Project article.

6) This question assesses whether you know how to implement Reserve Analysis in a
project. Option B does not protect against cost overrun, rather it is a schedule buffer.
Option C is not a planning activity. Option D is not a planning activity. Therefore,
Option A is the only valid answer. For more information, read Protect Your Project
Against Cost Overruns article.

7) The question is related to Cost of Quality (CoQ). For more information, read the
Using the Cost of Quality (CoQ) article.

8) The scenario is related to making a holistic decision regarding material to build

shed. The factors maintenance and durability are inputs used during Life-Cycle
Costing. For more information, read the What is Life-Cycle Costing? article.

Bonus PMP Question

Which of the following is NOT a factor when determining the length of an Iteration?

A) The Release Length

B) The Degree of Uncertainty

C) The Cost of the Project

D) The Student Syndrome