Project Cost Management: Master Project Budgeting and Expense Control

Question 1

What is the formula for calculating earned value?

Accepted Answer

EV = BCWP - ACWP

Answer

EV = BCWS - ACWP

Answer

EV = BCWP / ACWP

Answer

EV = BCWS / ACWP

Question 2

What is the purpose of a cost-benefit analysis?

Accepted Answer

To compare the benefits of a project to its costs

Answer

To track project expenses

Answer

To control project costs

Answer

To estimate total project costs

Question 3

Which of the following is NOT a crucial step in project cost management?

Accepted Answer

Project scheduling

Answer

Cost estimation

Answer

Budgeting

Answer

Expense tracking

Question 4

What is the primary purpose of a cost baseline in project cost management?

Accepted Answer

To define a benchmark for measuring project progress

Answer

To predict potential cost overruns

Answer

To communicate project costs to stakeholders

Answer

To track actual project expenses

Question 5

Which budgeting technique involves distributing funds based on past project data?

Accepted Answer

Incremental budgeting

Answer

Activity-based budgeting

Answer

Zero-based budgeting

Answer

Value stream budgeting

Question 6

Define a contingency fund.

Accepted Answer

A reserve of funds set aside for unforeseen expenses

Answer

A fund allocated to cover project overruns

Answer

A fund used to finance project activities

Answer

A fund used to reward project team members

Question 7

What is the main objective of cost control in project management?

Accepted Answer

Ensuring that project costs adhere to the budget

Answer

Identifying and mitigating cost overruns

Answer

Optimizing project resource allocation

Answer

Reducing project duration

Question 8

Which technique estimates project costs based on the costs of similar projects?

Accepted Answer

Analogous estimating

Answer

Parametric estimating

Answer

Three-point estimating

Answer

Unit pricing

Question 9

Explain the key difference between bottom-up and top-down cost estimates.

Accepted Answer

Bottom-up estimates analyze project activities in detail, while top-down estimates consider overall project goals.

Answer

Top-down estimates analyze project activities in detail, while bottom-up estimates consider overall project goals.

Answer

Both bottom-up and top-down estimates yield equally accurate results.

Answer

Bottom-up estimates are inherently more accurate than top-down estimates.

Question 10

Which of the following is NOT a key component of project cost management?

Accepted Answer

Risk management

Answer

Cost estimation

Answer

Budgeting

Answer

Expense management

Question 11

What is the main role of a cost management plan?

Accepted Answer

To document the project's cost management approach, including cost estimation, budgeting, and cost control strategies.

Answer

To establish the project's cost baseline

Answer

To track project expenses

Answer

To control project costs

Question 12

Which of the following is NOT a recognized cost estimation technique?

Accepted Answer

SWAG (scientific wild-a** guess)

Answer

Analogous estimation

Answer

Parametric estimation

Answer

Three-point estimation

Question 13

Which of the following techniques is NOT used for cost estimation?

Accepted Answer

Guesstimating

Answer

Parametric estimating

Answer

Analogous estimating

Answer

Bottom-up estimating

Question 14

Assigning the project budget to specific activities or resources is the process known as:

Accepted Answer

Budgeting

Answer

Forecasting

Answer

Estimating

Answer

Cost control

Question 15

Which of the following is NOT a common category of project cost?

Accepted Answer

Opportunity cost

Answer

Fixed cost

Answer

Indirect cost

Answer

Direct cost

Question 16

The earned value method (EVM) primarily serves the purpose of:

Accepted Answer

Measuring project progress and cost performance.

Answer

Estimating project completion date.

Answer

Creating a project budget.

Answer

Allocating resources to the project.

Question 17

When controlling project costs, it is crucial to:

Accepted Answer

Regularly compare actual costs against budgeted costs.

Answer

Overlook changes to project requirements.

Answer

Alter the project scope without proper authorization.

Question 18

Establishing a cost baseline is primarily done to:

Accepted Answer

Provide a benchmark against which actual project costs can be compared.

Answer

Identify potential cost overruns.

Answer

Distribute funds to various project activities.

Question 19

Fixed costs and variable costs differ primarily because:

Accepted Answer

Fixed costs remain constant regardless of project activity level, while variable costs fluctuate with activity level.

Answer

Fixed costs are incurred before the project starts, while variable costs are incurred during project execution.

Question 20

Which tool is primarily used to track project expenses?

Accepted Answer

Cost ledger

Answer

Risk register

Answer

Project charter

Answer

Work breakdown structure (WBS)

Question 21

Contingency reserves play a significant role in project cost management, primarily because they:

Accepted Answer

Provide a buffer to absorb unexpected costs and mitigate project risks.

Answer

Are required by all project stakeholders.

Answer

Are used to fund additional project activities.

Question 22

Which cost estimation technique involves breaking down a project into smaller, manageable work packages and estimating the cost of each package?

Accepted Answer

Bottom-up estimating

Answer

Analogous estimating

Answer

Top-down estimating

Answer

Parametric estimating

Question 23

A project manager is tracking the actual costs incurred against the planned budget. Which cost management process is this?

Accepted Answer

Cost Control

Answer

Cost Planning

Answer

Cost Budgeting

Answer

Cost Estimation

Question 24

What is the primary purpose of a project budget?

Accepted Answer

To provide a financial plan for the project and track expenses.

Answer

To determine the project's feasibility.

Answer

To motivate the project team.

Question 25

A project manager is using a spreadsheet to track the project's actual costs and compare them to the planned budget. Which tool is this?

Accepted Answer

Cost Tracking Spreadsheet

Answer

Cost Baseline

Answer

Cost Performance Report

Answer

Earned Value Management

Question 26

A project has a planned budget of £100,000 and has incurred actual costs of £80,000. What is the Cost Performance Index (CPI)?

Accepted Answer

1.25

Answer

0.5

Answer

0.8

Answer

1.0

Question 27

Which of the following is NOT a common risk associated with project cost management?

Accepted Answer

Inadequate project scope definition

Answer

Unforeseen cost increases due to inflation

Answer

Lack of skilled resources

Answer

Changes in project requirements

Question 28

A project team is using a technique to estimate the cost of a project based on historical data from similar projects. Which cost estimation technique is this?

Accepted Answer

Analogous estimating

Answer

Bottom-up estimating

Answer

Top-down estimating

Answer

Parametric estimating

Question 29

What is the difference between a budget and a cost baseline?

Accepted Answer

A budget is a financial plan, while a cost baseline is a time-phased budget used for performance measurement.

Answer

A budget is a detailed breakdown of costs, while a cost baseline is a summary of estimated costs.

Question 30

Which of the following is NOT a common method for controlling project costs?

Accepted Answer

Increasing the project scope

Answer

Monitoring resource utilization

Answer

Negotiating with vendors

Answer

Identifying and mitigating cost risks

Question 31

A project manager is using a technique to estimate the cost of a project by multiplying the number of units of work by a predetermined cost per unit. Which cost estimation technique is this?

Accepted Answer

Parametric estimating

Answer

Top-down estimating

Answer

Analogous estimating

Answer

Bottom-up estimating