PMP - Project Cost Management

1) Which of the following isn't part of the cost management plan?

a. States how costs will be controlled.
b. Estimating units of measure and precision.
c. Reporting formats.
d. Cost reimbursement schedule.

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2) Which of the following is an input for estimating project cost?

a. Project funding requirements.
b. Basis of estimates.
c. Risk register.
d. Cost performance baseline.

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3) Which of the following process areas generate the input for estimating project cost?

a. Milestone list (output) from Define Activities (Process area) in Project time management (Knowledge area).
b. Project schedule (output) from Develop schedule (Process area) in Project time management (Knowledge area).
c. Risk management plan (output) from Plan risk management (Process area) in Project risk management (Knowledge area).
d. Project staff assignments (output) from Acquire project team (Process area) in Project human resource management (Knowledge area).

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4) Which of the following is an output from estimating project cost?

a. Cost performance baseline.
b. Basis of estimates.
c. Project funding requirements.
d. Work performance measurements.

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5) Which of the following outputs of estimating project cost is used as input in controlling project cost?

a. Activity cost estimates.
b. Basis of estimates.
c. Project document updates.
d. None of the above.

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6) Which of the following tools & techniques used for estimating project cost?

a. Reserve analysis.
b. Cost aggregation.
c. Funding limit reconciliation.
d. Variance analysis.

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7) Which of the following is an input to determine budget?

a. Human resource plan.
b. Resource calendars.
c. Project management plan.
d. Project funding requirements.

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8) Which of the following process areas generates an input to determine budget?

a. Project scope statement (output) from Define scope (Process area) in Project scope management (Knowledge area).
b. Requirements management plan (output) from Collect requirements (Process area) in Project scope management (Knowledge area).
c. Scope baseline (output) from Create WBS (Process area) in Project time management (Knowledge area).
d. Milestone list (output) from Define Activities (Process area) in Project time management (Knowledge area).

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9) Which of the following is an output of determine project budget?

a. Cost performance baseline.
b. Basis of estimates.
c. Activity cost estimates.
d. Work performance measurements.

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10) Which of the following tools & techniques is/are used by both estimating cost and determining budget?

a. Cost aggregation.
b. Expert judgment.
c. Funding limit reconciliation.
d. Variance analysis.

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11) Which of the following is an input to control project cost?

a. Scope baseline.
b. Human resource plan.
c. Resource calendars.
d. Work performance information.

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12) Which of the following process areas generate an input for controlling project cost?

a. Project scope document (output) from Define Scope (Process area) in Project scope management (Knowledge area).
b. Work performance measurements (output) from Control scope (Process area) in Project scope management (Knowledge area).
c. Risk management plan (output) from Plan risk management (Process area) in Project risk management (Knowledge area).
d. Cost performance baseline (output) from Determine project budget (Process area) in Project cost management (Knowledge area).

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13) Which of the following is not an output from controlling project cost?

a. Work performance measurements.
b. Change requests.
c. Project funding requirements.
d. Update to project management plan.

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14) Which of the following tools & techniques used in controlling project cost is also used for estimating project cost?

a. Earned value management.
b. Variance analysis.
c. Forecasting.
d. None of the above.

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15) Which of the following is not true about earned value management technique?

a. Is used to find out variances in projects based on the comparison of work performed against work planned.
b. Used to predict what will happen in future.
c. Used to indicate the deviation from schedule baseline, however cost deviation cannot be predictable.
d. Monetary measures is identified as schedule variances.

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16) Which of the following terms correctly described by - “The estimated value of the work actually accomplished”?

a. Planned value.
b. Earned value.
c. Cost variance.
d. Actual cost.

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17) All the items in the earned value management is measured in terms of………..?

a. Scope.
b. Schedule.
c. Cost.
d. B & C above.

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18) Which of the below is/are primary items in earned value management?

a. Scope.
b. Resources.
c. Project plan with duration.
d. All the above.

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19) Five houses have been planned to be built. Each house will cost 10K USD and 20 days to build. At the end of 70 days found 3 houses have been completed and cost incurred is 40K USD. What is the cost performance index using EVM technique?

a. 100%
b. 115%
c. 75%
d. 90%

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20) A house has been planned to be built in 12 days but took 15 days, also estimated 2 more days to be taken additionally. Each day costs 10K USD. As the project should had been already completed, howmuch the project is over schedule?

a. Over schedule by 8%
b. Over schedule by 12%
c. Over schedule by 16%
d. Over schedule by 20%

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21) A project has SPI as 80% and EV as 24 days, so what is schedule variation?

a. 6 days under schedule
b. 6 days over schedule
c. 3 days over schedule
d. 3 days under schedule

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22) Which of the below projects to be selected?

a. Project A with Opportunity Cost of $ 100,000
b. Project B with NPV of $100,000
c. Project C with Benefit-Cost Ratio of 0.90
d. Project D with IRR of -10%

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23) A project has EV is $1000, AC is $1300 and PV is $1200 so what is cost variation (CV)?

a. -$200
b. $200
c. -$300
d. $300

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24) A company will get investment $112,000 one year from now. The interest rate used in the company to calculate Present Value of expected yearly benefits and costs is 12%. What is the Present Value of this investment?

a. $112,000
b. $100,000
c. $96,000
d. $92,500

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Conclusions

1)
* Cost management plan consists of - Plan how costs will be controlled, Estimating units of pressure, estimating precision, permissible variance thresholds, earned value rules and reporting formats.
* Project cost management involves - estimating costs (developing an approximation of the monetary resources needed to complete project activities), determining budget (Establish an authorized cost baseline for assigning project cost), controlling cost (Monitoring and controlling the project budget and managing changes to the cost baseline).

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2)
* The inputs required for estimating project cost are - Scope baseline (is an output of "create WBS" from "project scope management"), Project schedule (is an output of "develop schedule" from "project time management"), Human resource plan (is an output of "Develop human resource plan" from "Project human resource management"), Risk register (is an output of "Identify risk" from "Project risk management"), Enterprise environmental factors (the internal or external factors which might impact or influence the project's success) and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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3)
* The inputs required for estimating project cost are - Scope baseline (is an output of "create WBS" from "project scope management"), Project schedule (is an output of "develop schedule" from "project time management"), Human resource plan (is an output of "Develop human resource plan" from "Project human resource management"), Risk register (is an output of "Identify risk" from "Project risk management"), Enterprise environmental factors (the internal or external factors which might impact or influence the project's success) and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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4)
* The outputs developed from estimating project cost are - Activity cost estimates (is an input to "Determine budget" in "Project cost management"), Basis of estimates (is an input to "Determine budget" in "Project cost management") and Project document updates (Cost management plan initially updated in the project management plan and is keep getting updated).

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5)
* The outputs developed from estimating project cost are - Activity cost estimates (is an input to "Determine budget" in "Project cost management"), Basis of estimates (is an input to "Determine budget" in "Project cost management") and Project document updates (Cost management plan initially updated in the project management plan and is keep getting updated).
* The inputs required for controlling project cost are - Project management plan (is an output of "Develop project management plan" from "Project integration management", Project funding requirements (is an output of "Determine budget" from "Project cost management"), Work performance information (from "Work performance measurements" using "variance analysis (Tools and technique)" from "Control scope" in "Project scope management" and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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6)
* The tools and techniques used in estimating project cost are - Expert judgement, Analogous estimating (like if 100 test cases take 1 week time then 99 test cases also would take the same time), Parametric estimating (like 2 resources take 2 days leave is equal to 1 takes 4 days), Bottom-up estimating (Roll-up the estimate from bottom), Three-point analysis (PERT analysis - calculating activity durations by drawing the project schedule network, analyze paths, finding critical paths and determine the length of durations), Reserve analysis, Cost of quality (Cost of conformance, salary etc + non conformance, defects fix etc.), Project management estimating software and Vendor bid analysis.



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7)
* The inputs required to determine project budget are - Activity cost estimates (is an output of "Estimate cost" from "Project cost management"), Basis of estimates (is an output of "Estimate cost" from "Project cost management"), Scope baseline (is an output of "create WBS" from "Project scope management"), Project schedule (is an output of "develop schedule" from "Project time management"), Resource calendars (is an output of “Acquire project team” from “Project human resource management”, Contracts(from “Project procurement management”) and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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8)
* The inputs required for determine project budget are – Activity cost estimates (is an output of "Estimate costs" from "project cost management"), Basis of estimates (is an output of "Estimate costs" from "project cost management"), Scope baseline (is an output of "Create WBS" from "Project Scope management"), Project schedule (is an output of "Develop schedule" from "Project time management"), Resource calendars (is an output of “Acquire project team” from “Project human resource management”, Contracts (from “Project procurement management”) and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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9)
* The outputs developed from determine project budget are - Cost performance baseline (is an input to " Control costs" in "Project cost management"), Project funding requirements (is an input to "Control costs" in "Project cost management") and Project document updates (Cost management plan initially updated in the project management plan and is keep getting updated).

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10)
* The tools and techniques used in estimating project cost are - Expert judgement, Analogous estimating (like if 100 test cases take 1 week time then 99 test cases also would take the same time), Parametric estimating (like 2 resources take 2 days leave is equal to 1 takes 4 days), Bottom-up estimating (Roll-up the estimate from bottom), Three-point analysis (PERT analysis - calculating activity durations by drawing the project schedule network, analyze paths, finding critical paths and determine the length of durations), Reserve analysis, Cost of quality (Cost of conformance, salary etc + non conformance, defects fix etc.), Project management estimating software and Vendor bid analysis.
* The tools and techniques used in determine project budget are – Cost aggregation, Reserve analysis, Expert judgment, Historical relationships and Funding limit reconciliation.

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11)
* The inputs required for controlling project cost are – Project management plan (is an output of "Develop project management plan" from "Project integration management", Project funding requirements (is an output of "determine budget" from "project cost management"), Work performance information (from "Work performance measurements" using "variance analysis (Tools and technique)" from "Control scope" in "Project scope management" and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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12)
* The inputs required for controlling project cost are – Project management plan (is an output of "Develop project management plan" from "Project integration management", Project funding requirements (is an output of "determine budget" from "project cost management"), Work performance information (from "Work performance measurements" using "variance analysis (Tools and technique)" from "Control scope" in "Project scope management" and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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13)
* The output developed from controlling project cost are – Work performance measurements (is an input to "Perform quality control" in "Project quality management"), Budget forecasts (is an input to "Report performance" in "project communication management"), Change requests (“Approved change requests” is an input to "Perform quality control" in "Project quality management"), Project management plan updates (Cost management plan initially updated in the project management plan and is keep getting updated), Project document and Organizational process assets (Process related assets of any organization involved in the project can include - Formal/informal plans, policies, procedures, guidelines, lessions learned (historical information) etc).

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14)
* The tools & techniques used in controlling project cost are – Earned value management, Forecasting, Performance reviews, Variance analysis, Project management software and to-complete performance index.
* The tools and techniques used in estimating project cost are - Expert judgement, Analogous estimating (like if 100 test cases take 1 week time then 99 test cases also would take the same time), Parametric estimating (like 2 resources take 2 days leave is equal to 1 takes 4 days), Bottom-up estimating (Roll-up the estimate from bottom), Three-point analysis (PERT analysis - calculating activity durations by drawing the project schedule network, analyze paths, finding critical paths and determine the length of durations), Reserve analysis, Cost of quality (Cost of conformance, salary etc + non conformance, defects fix etc.), Project management estimating software and Vendor bid analysis.

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15)
* Earned value management is a systematic project management process is used to find variances in project based on the comparison of work performed against work planned.
* Used “work in progress” to predict what will happen in future.
* Result from analysis indicate the deviation from cost and schedule baseline of the project.
* Monetary measures interpreted to determining schedule variances.



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16)
* Earned value management technique uses the following terms,
- Planned value, PV/BCWS (Budgeted cost of work scheduled), is the estimated value of the work planned to be done or valuation of planned work.
- Earned value, EV/BCWP (Budgeted cost of work performed), is the estimated value of the work actually accomplished or quantification of accomplished work.
- Actual cost, AC/ACWP (Actual cost of work performed), is the actual cost incurred for the work accomplished.
- Budget at completion, BAC, Budgeted for completion of project.
- Estimate at completion, EAC, Total project estimated to cost.
- Estimate to complete, ETC, More cost expected to complete the project.
- Variance at completion, VAC, The variance (over/under budget) is expected to be.
* Few formulas.
- Cost variance, CV, EV-AC, Positive value is good, under budget.
- Schedule variance, SV, EV-PV, Positive value is good, ahead of schedule.
- Cost performance index, CPI, EV/AC, >=1 is good, under budget.
- Schedule performance index, SPI, EV/PV, >=1 is good, ahead of schedule.
Estimate at completion, EAC:
- BAC/CPI, AC+ETC(new). Original estimate is not valid any more. Now Original + new estimate for remaining work.
- Also EAC can be calculated, AC+BAC-EV, Actual cost till now + new budget for remaining work. This can be used if past trends cannot be used in future.
- Also EAC can be calculated, AC+(BAC-EV)/CPI, Actual cost till now + new budget for remaining work modified by performance. This can be used if past trends continue in future.
- Estimate at completion, ETC, EAC-AC
- Variance at completion, VAC, BAC-EAC

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17)
* Cost is the measurement term used for all the values in earned value management.

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18)
* The primary items in EVM – Project plan with duration, scope and resources properly added.

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19)

* BAC, Total cost to build 5 houses, 10K*5 = 50K USD.
* AC, Actual cost, 40K USD.
* PV, Planned value, after 70 days 3 houses + half of 4th house should have been completed (3.5 houses), 3.5*10K = 35K USD.
* EV, Earned value, actual accomplishment, 3*10K = 30K USD.
* SV, Schedule variance, EV-PV, 30K-35K = -5K USD. (Over schedule)
* CV, Cost variance, EV-AC, 30K-40K = -10K USD. (Over budget)
* SPI, Schedule performance index, EV/PV, 30K/35K = 85.7% (Over schedule)
* CPI, Cost performance index, EV/AC, 30K/40K = 75% (Over budget)
* EAC, Estimate at completion, BAC/CPI, 50K/0.75 = 66.67K USD
* VAC, Variance at completion, BAC-EAC, 50K-66.67K = 16.67K USD
* ETC, Estimate to completion, EAC-AC, 66.67K-40K = 16.67K USD

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20)

* Daily cost, 10K USD.
* BAC, Total cost based to build house, 12*10K, 120K USD.
* AC, Total days taken already x Daily cost, 15*10K = 150K USD.
* PV, Total days planned x Daily cost, 12*10K = 120K USD.
* ETC, Total days additionally x Daily cost, 2*10K = 20K USD.
* EAC, AC+ETC, 150K+20K = 170K USD.
* VAC, BAC-EAC, 120K-170K = 50K USD.
* Planned completed%, PV/BAC, 120K/120K, 100%
* Actual completed%, AC/EAC, 150K/170K, 88.23%
* EV, BAC * Actual completed%, 120K*88.23% = 105.88K USD.
* SV, Schedule variance, EV-PV, 105.88K-120K = -14.12K USD. (Over schedule)
* CV, Cost variance, EV-AC, 105.88K-150K = -44.11K USD. (Over budget)
* SPI, Schedule performance index, EV/PV, 105.88K/120K = 88.24% (Over schedule)
* CPI, Cost performance index, EV/AC, 105.88K/150K = 70.59% (Over budget)

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21)
SPI = 80%, EV = 24 days
PV = EV/SPI, 24/0.8 = 30 days SV = EV-PV
SV = 24-30, -6 days.
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22)
* Opportunity cost cannot be a project selection criteria.
* Positive net profit value will profit the project and good to choose.
* Benefit-cost ratio < 100% is at loss. So should not be selected.
* Internal rate of return in negative indicates it’s in loss, so not preferable.

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23)
EV = $1000, AC = $1300 and PV = $1200
CV = EV – AC, -$300.
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24)
Justification: The interest rates used to calculate Present Value of expected yearly benefits and costs is - discount rate. PV = 112000/1.12 = 100000
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