Cost Control and Earned Value Management: Master Project Cost and Progress

Question 1

What is the primary purpose of variance analysis in project cost control?

Accepted Answer

Identifying and interpreting discrepancies between planned and actual project costs

Answer

Forecasting potential future project costs

Answer

Optimizing resource allocation for improved efficiency

Answer

Measuring the profitability of the project relative to expectations

Question 2

Which of the following is NOT a recognized benefit of using earned value management (EVM)?

Accepted Answer

Significant reduction in overall project costs

Answer

Enhanced project visibility and improved monitoring capabilities

Answer

Early identification and mitigation of project risks

Answer

Strengthened communication and collaboration among project stakeholders

Question 3

Which key indicator in EVM specifically measures project schedule performance?

Accepted Answer

Schedule Performance Index (SPI)

Answer

Cost Performance Index (CPI)

Answer

Earned Schedule Variance (ESV)

Answer

Earned Value (EV)

Question 4

What is the significance of a cost management plan in project management?

Accepted Answer

It outlines the specific processes, responsibilities, and tools for managing project costs effectively

Answer

It forecasts project revenue and identifies potential funding sources

Answer

It tracks and monitors project risks that could impact costs

Answer

It allocates project resources and ensures efficient utilization

Question 5

What is the fundamental difference between direct and indirect costs in project management?

Accepted Answer

Direct costs can be directly attributed to a specific project activity, while indirect costs are shared across multiple activities

Answer

Indirect costs are fixed costs, whereas direct costs are variable costs

Answer

Direct costs are paid to contractors, while indirect costs are paid to employees

Answer

Indirect costs are incurred before the project starts, while direct costs are incurred during project execution

Question 6

What is the primary purpose of a variance report in project cost control?

Accepted Answer

To identify, analyze, and explain differences between actual and planned project costs

Answer

To forecast future project cash flow and identify potential financial risks

Answer

To update the project budget and revise cost estimates

Answer

To measure project profitability and assess financial performance

Question 7

What is the difference between planned value (PV) and earned value (EV)?

Accepted Answer

Planned value is the estimated cost of completing the project, while earned value is the actual cost incurred to date.

Answer

Earned value is the estimated cost of completing the project, while planned value is the actual cost incurred to date.

Answer

Planned value and earned value are the same.

Answer

Planned value is the actual cost of completing the project, while earned value is the estimated cost incurred to date.

Question 8

What is the significance of a negative cost variance?

Accepted Answer

The project is over budget.

Answer

The project is under budget.

Answer

The project is on budget.

Answer

The cost variance has no significance.

Question 9

Which of the following is NOT a standard component of Cost Control?

Accepted Answer

Quality assurance

Answer

Cost planning and budgeting

Answer

Cost monitoring and reporting

Answer

Cost forecasting

Question 10

Which type of variance analysis indicates a positive deviation between planned and actual costs?

Accepted Answer

Favorable variance

Answer

Unfavorable variance

Answer

Zero variance

Answer

Cumulative variance

Question 11

What is the main benefit of using earned value management (EVM) in project management?

Accepted Answer

Increased project visibility and enhanced control

Answer

Shorter project duration

Answer

No cost overruns

Answer

Wider project scope

Question 12

What does the cost performance index (CPI) primarily indicate?

Accepted Answer

Whether the project is under or over budget

Answer

The efficiency of resource utilization

Answer

The likelihood of project completion on time

Answer

The project's overall progress and performance

Question 13

What does a positive cost variance typically indicate?

Accepted Answer

The project is under budget

Answer

The project is over budget

Answer

The project is on budget

Answer

The project is delayed

Question 14

Which metric is not a core component of Earned Value Management (EVM)?

Accepted Answer

Return on Investment (ROI)

Answer

Planned Value (PV)

Answer

Actual Cost of Work Performed (ACWP)

Answer

Cost Variance (CV)

Question 15

Which of the following is **not** a benefit of Earned Value Management (EVM)?

Accepted Answer

Increased project complexity

Answer

Early identification of cost and schedule variances

Answer

Improved communication and transparency

Answer

Reduced project completion risk

Question 16

Which of the following is a key distinction between Earned Value and Actual Cost?

Accepted Answer

Earned Value is based on completed work, while Actual Cost is based on expenses incurred.

Answer

Actual Cost is based on completed work, while Earned Value is based on expenses incurred.

Answer

There is no difference between Earned Value and Actual Cost.

Answer

Earned Value is always higher than Actual Cost.

Question 17

What is the primary purpose of a cost baseline?

Accepted Answer

To establish a reference point against which project costs can be compared

Answer

To forecast future project costs

Answer

To allocate project funds to different activities

Answer

To track project expenses on a daily basis

Question 18

What is the purpose of the Schedule Performance Index (SPI)?

Accepted Answer

To measure the efficiency of project progress

Answer

To forecast project completion date

Answer

To calculate project cost variance

Answer

To evaluate project risk

Question 19

Which of the following is NOT a key performance indicator (KPI) used in cost control?

Accepted Answer

Customer Satisfaction

Answer

Cost Variance

Answer

Schedule Variance

Answer

Earned Value

Question 20

What is the purpose of Earned Value Management (EVM)?

Accepted Answer

To track project progress and performance

Answer

To estimate project costs

Answer

To control project scope

Answer

To manage project risks

Question 21

What is the difference between a cost overrun and a cost underrun?

Accepted Answer

Cost overrun occurs when actual costs exceed budgeted costs, while cost underrun occurs when actual costs are less than budgeted costs.

Answer

Cost overrun occurs when actual costs are less than budgeted costs, while cost underrun occurs when actual costs exceed budgeted costs.

Answer

Both cost overrun and cost underrun refer to situations where actual costs are equal to budgeted costs.

Answer

There is no difference between cost overrun and cost underrun.

Question 22

What is the role of a cost baseline in project management?

Accepted Answer

To provide a reference point against which actual costs can be compared and variances analyzed

Answer

To estimate project costs

Answer

To track project progress

Answer

To manage project risks

Question 23

Which of the following is not a fundamental principle of cost control in project management?

Accepted Answer

Optimization of cost overruns

Answer

Variance analysis

Answer

Baseline plan

Answer

Performance measurement

Question 24

A cost variance of £10,000 under budget indicates that:

Accepted Answer

Project is on schedule but under budget

Answer

Project is progressing as planned

Answer

Project is behind schedule and over budget

Answer

Project is ahead of schedule and over budget

Question 25

What is the formula for calculating the Cost Variance (CV)?

Accepted Answer

CV = Earned Value - Actual Cost

Answer

CV = Planned Value - Earned Value

Answer

CV = Actual Cost - Planned Value

Answer

CV = Earned Value - Planned Value