cost management mock exam

8/21/2019 Cost Management Mock Exam

1/18

Self Test COST

1. Which one of the following best describes analogous estimating?

A. Regression analysisB.

Bottom-up estimatingC. Less accurateD. More accurate

2. You are the project manager for GHG Project. You are about to create the costestimates for the project. Which input to this process will help you the most?

A. Parametric modelingB. WBSC.

Project scope

D.

Requirements document

3. You are the project manager for the JKH Project. You have elected to useparametric modeling in your cost estimating for the project. Which one of thefollowing is an example of parametric modeling?

A. $750 per tonB.

Historical information from a similar projectC. Estimates built bottom-up based on the WBSD.

Estimates based on top-down budgeting

4. You are the project manager for a new technology implementation project.Management has requested that your estimates be as exact as possible. Which oneof the following methods of estimating will provide the most accurate estimate?

A.

Top-down estimatingB. Top-down budgetingC.

Bottom-up estimatingD. Parametric modeling

5. Your company has been hired to install the tile in 1,000 hotel rooms. All rooms

will be identical in nature and will require the same amount of materials. Youcalculate the time to install the tile in each hotel room as six hours. The cost forlabor for each room is calculated at $700. Your Project Sponsor disagrees withyour labor estimate. Why?

A. You havent completed one hotel room yet so you dont know how long thework will actually take.

B.

You have not factored in all of the effort applied to the work.C. You have not considered the law of diminishing returns.D.

You have not considered the learning curve.

6. You are the project manager for a construction project to build 17 cabins. All ofthe cabins will be identical in nature. The contract for the project is set at a fixed


2/18

cost, the incentive being the faster the project work is completed, the more theprofitable the job. Management has requested that you study the work method todetermine a faster, less costly, and better method to complete the project. This is anexample of which one of the following?

A.

Time constraintB. Schedule constraintC. Value analysisD.

Learning curve

7. You are the project manager for a technical implementation project. The customerhas requested that you factor in the after-the-project costs, such as maintenance andservice. This is an example of which one of the following?

A. Life cycle costsB. Scope creep

C.

Project spin offD. Operations

8. Which one of the following provides the least accurate in estimating?

A. Rough order of magnitudeB.

Budget estimateC. Definitive estimateD.

WBS estimate

9. Which one of the following is true?

A. The cost management plan controls how change management affects theBAC.

B.

The cost management plan controls how cost variances will be managed.C. The cost management plan controls how the project manager may update

the cost estimates.D. The cost management plan controls how the BAC may be adjusted.

10. You have just started a project for a manufacturer. Project team members reportthey are 30 percent done with the project. You agree with their completion status

but do not change any of the progress in your report to the customer. This is anexample of which one of the following?

A.

50/50 ruleB. 0/100 ruleC. Percent Complete RuleD.

Poor project management

11. You and your project team are about to enter a meeting to determine project costs.You have elected to use bottom-up estimating and will base your estimates on theWBS. Which one of the following is not an attribute of bottom-up estimating?


3/18

A. People doing the work create the estimates.B.

Creates a more accurate estimate.C. More expensive to do than other methods.D. Less expensive to do than other methods.

12. What is the present value if the organization expects to make $100,000 four yearsfrom now and the annual interest rate is six percent?

A. $100,000B.

$58,000C. $25,000D. Zero

13. You are the project manager for the construction of a new hotel. Before you beginthe cost budgeting process, what is needed?

A.

Costs estimates and project scheduleB. Cost estimates and supporting detailC.

EAC and BACD. Parametric model used to arrive at the costs submitted

14. You are the project manager of the MNJ Project. Your project is falling behindschedule and you have already spent $130,000 of your $150,000 budget. What doyou call the $130,000?

A. Planned value

B.

Present valueC. Sunk costsD.

Capital expenditure

15. You are the project manager of the JHD Project. Your project will cost yourorganization $250,000 to complete over the next eight months. Once the project iscompleted, the deliverables will begin earning the company $3,500 per month. Thetime to recover the costs of the project is which one of the following?

A.Not enough information to knowB.

Eight months

C.

72 monthsD.

5 years

16. You are the project manager for the consulting company. Your company has twopossible projects to manage, but they can only choose one. Project KJH is worth$17,000, while Project ADS is worth $22,000. Management elects to chooseProject ADS. The opportunity cost of this choice is which one of the following?

A. $5,000B. $17,000C. $22,000D.

Zero, as project ADS is worth more than Project KJH


4/18

17. You are the project manager for the CSR Training Project, and 21,000 customerservice reps are invited to attend the training session. Attendance is optional. Youhave calculated the costs of the training facility, but the workbook expensedepends on how many students register to the class. For every 5,000 workbookscreated the cost is reduced a percentage of the original printing cost. The workbook

expense is an example of which one of the following?

A. Fixed costsB.

Parametric costsC. Variable costsD.

Indirect costs

18. You are the project manager of a construction project scheduled to last 24 months.You have elected to rent a piece of equipment for the duration of a project, eventhough you will need the equipment only periodically throughout the project. Thecosts of the equipment rental per month are $890. This is an example of

________________.

A.

Fixed costsB. Parametric costsC. Variable costsD. Indirect costs

19. You are the project manager for the Hardware Inventory Project. You have a pieceof equipment that was purchased recently for $10,000 and is expected to last fiveyears in production. At the end of the five years the expected worth of the

equipment is $1,000. Using straight-line deprecation, what is the amount that canbe written off each year?

A. ZeroB. $1,000C.

$1,800D. $2,000

20. You are the project manager of the LKG Project. The project has a budget of$290,000 and is expected to last three years. The project is now ten percentcomplete and is on schedule. What is the BAC?

A. $29,000B. $290,000C. $96,666D.

$9,666

21. Your project has a budget of $130,000 and is expected to last ten months, with thework and budget spread evenly across all months. The project is now in monththree, the work is on schedule, but you have spent $65,000 of the project budget.What is your variance?

A.

$65,000B.

$39,000


5/18

C. $26,000D.

$64,999

22. You are the project manager of the Carpet Installation Project for a new building.Your BAC is $600,000. You are now 40 percent done with the project, though

your plan called for you to be 45 percent done with the work at this time. What isyour earned value?

A. $240,000B.

$270,000C. $30,000D.$30,000

23. You are the project manager of the Carpet Installation Project for a new building.Your BAC is $600,000. You have spent $270,000 of your budget. You are now 40

percent done with the project, though your plan called for you to be 45 percentdone with the work at this time. What is your CPI?

A.

100B. 89C.

.89D. .79

24. You are the project manager for the Facility Installation Project. The project callsfor 1500 units to be installed into a new baseball stadium. Your team wants toknow why you have not assigned the same amount of time for the last 800 units as

you had for the first five hundred units. You tell them it is because of the learningcurve. Which one of the following best describes this theory?

A. Production increases as workers become more efficient with the installationprocedure.

B. Efficiency increases as workers become more familiar with the installationprocedure.

C. Costs decrease as workers complete more of the installation procedure.D. Time decreases as workers complete more of the installation procedure in

the final phases of a project.

25. Of the following, which one is the most reliable source of information forestimating project costs?

A.

Historical information from a recently completed projectB.

An SMEs opinionC. Recollections of team members that have worked on similar projectsD.

Vendors white papers

Answers


6/18

1. C.Analogous estimating is less accurate than other estimating methods.

Ais incorrect, as regression analysis is a type of parametric modeling. Bis incorrect,as bottom-up estimating starts with zero and adds up the project costs. Dis incorrect, asanalogous estimating is not more accurate.

2. B.The WBS is the input that can help you the most with the cost estimates.

Ais incorrect, as parametric modeling is a form of estimating, not an input. Cisincorrect, as the project scope is not an input to the estimating process. Dis incorrect, asthe requirements document is also not an input to the estimating process.

3. Ais correct; $750 per ton is an example of parametric modeling.

Bis incorrect, as historical information is analogous, not parametric. Cand Dareincorrect, as these do not describe parametric modeling.

4. C.Bottom-up estimating provides the most accurate estimates. The project manager

starts at zero, the bottom, and accounts for each cost within the project.

A,B, and Dare all incorrect as they do not reflect the most accurate method to createan estimate.

5. Dis the best choice. As the project team completes more and more units, the time tocomplete a hotel room should take less and less time.

Choices A,B, and Care incorrect as they do not answer the question as fully as answerD.

6. C.Value analysis is a systematic approach to find less costly ways to complete thesame work.

Aand Bare not correct, as this situation does not describe a specific time or costconstraint. Dis incorrect, as the learning curve happens as the project team completes thework. Value analysis is a study of a process to complete the work faster and moreaffordably.

7. A.The after-project costs are known as the life cycle costs.

Choices Band Care incorrect, though tempting, because they do not describe theprocess of calculating the ongoing expenses of the product the project is creating. Disincorrect; operations do not fully describe the expenses unique to the product.

8. A.The rough order of magnitude is the least accurate approach, as it may vary from25 percent to +75 percent.

Choices Band Care more accurate estimates than the rough order of magnitude.Choice Dis not a valid answer for this question.

9. B.The cost management plan controls how cost variances will be managed.

Choices A,C, and Dare incorrect descriptions of the cost management plan.

10.B.This is an example of the 0/100 rule. This completion method allows for zeropercent credit on an activity until it is 100 percent complete.

Choice Aallows for 50 percent completion when the work begins and 50 percent whenthe work is completed. Choices Cand Dare incorrect responses, as they do not describe


7/18

the scenario.

11.D.Using bottom-up estimating is not less expensive to do.

A, B, and Care not correct choices, as these are attributes of a bottom-up estimatingprocess.

12.B.The present value of $100,000 four years from now can be calculated through thisformula: Present Value = FV/(1+R)n. FV is the future value, R is the interest rate, and nisthe number of time periods.

Choices A, C, and Dare all incorrect answers, as they do not reflect the present value.

13.A.Cost estimates and the project schedule are inputs to the cost budgeting process.

Choices B, C, and Dare all incorrect as they are not inputs to cost budgeting.

14.C.Sunk costs are monies that have been spent.

A

is incorrect, as planned value is the amount the project should be worth at this pointin the schedule. Bis incorrect; present value is the current value of future monies. Disincorrect; a capital expenditure is money spent to purchase a long-term asset, such as a

building.

15.C.The time to recoup the monies from the project is 72 months. This is calculated bydividing the ROI of $3,500 per month into the project cost.

Ais an incorrect answer. Bis incorrect; eight months is the amount of time left in theproject schedule. D, five years, is also incorrect.

16.B.The opportunity cost is the amount of the project that was not chosen.

Ais incorrect; $5,000 is the difference between the two projects, it is not theopportunity cost. Cis incorrect, as $22,000 is the amount of the project that was selected.Dis an incorrect answer.

17.C.This is an example of variable costs. The more students that register to take theclass the more the cost of the books will be.

Ais incorrect, as the cost of the book varies depending on the number of students thatregister for the class. Bis incorrect, as the cost of each book diminishes as more books arecreated. A parametric cost would remain the same regardless of how many books werecreated. Dis not correct, as this is not an example of an indirect cost.

18.

A.

This is a fixed cost expense of $890 per monthregardless of how often the pieceof equipment is used.

Bis incorrect, as a parametric cost is a value used to calculate cost per use, cost permetric ton, or cost per unit. While it may appear Bis a correct choice, there is nohistorical information mentioned to base the parametric model on. Cis incorrect, as thecost does not vary within the project. Dis also incorrect; this is a cost attributed directlyto the project work.

19.C.The straight-line depreciation takes the purchase value of the item, minus thesalvage price of the item, divided by the number of time periods. In this instance, it would

be $10,000 minus $1,000, or $9,000. The $9,000 is divided by five years and equates to

$1,800 per year.


8/18

A, C, and Dare all incorrect, as they do not reflect the correct calculation.

20.B.The BAC is the budget at completion, which is $290,000.

Ais incorrect, as it describes the earned value for the project. Cand Dare bothincorrect values.

21.C.$26,000 is the variance. This is calculated by subtracting the actual costs of $65,000from the earned value of $39,000. EV is calculated by taking the 30 percent completion ofthe project against the BAC. The project is considered to be 30 percent complete becauseits slated for ten months, is currently in month three, and is on schedule.

A, B, and Dare all incorrect calculations for the problem.

22.A.The earned value is calculated by multiplying the percentage of completion, 40percent, by the BAC, which is $600,000, for a value of $240,000.

B, C, and Dare incorrect calculations of the earned value formula.

23.

C

is the correct answer. The EV of $240,000 is divided by the AC of $270,000 for avalue of .89.

A and Dare incorrect calculations. Bis incorrect, as the value needs a decimal.

24.B.The learning curve allows the cost to decrease as a result of decreased installationtime as workers complete more of the installation procedure.

Choices A,C, and Dare all incorrect choices, as they do not correctly describe thelearning curve in relation to time and cost.

25.A.Of the choices presented, historical information from a recently completed project isthe most reliable source of information.

B, while valuable, is not as proven as historical information. Cis incorrect, asrecollections are the least reliable source of information. Dis also incorrect, though it may

prove valuable in the planning process.


9/18

Questions from Chapter Eleven

1. Cost, time, and quality are known as:

A. Triple constraints

B. Three chapters of PMBOK

C. Tactical measurements

D. Project indicators

2. Looking at a broad overview of the project costs is known as:

A. Auditing

B. Life cycle engineering

C. Life cycle costing

D. Value engineering

3. Value analysis and value management are other names for:

A. Profitability

B. Life cycle management

C. Life cycle costing

D. Value engineering

4. ROI and discounted cash flow are two examples of:

A. General management cost evaluation

B. Value management cost techniques

C. Project management cost evaluation

D. General cost techniques

5. Heating and electricity are examples of ________ costs.

A. Strategic

B. Tactical

C. Direct

D. Indirect

6. The project manager can have control over ________ costs.


10/18

A. Strategic

B. Tactical

C. Direct

D. Indirect

7. Cost control is easiest to do ________ the project.

A. Early in

B. Late in

C. In the middle of

D. After

8. The ________ gives the detail you need to correctly estimate costs for theproject.

A. Scope Statement

B. Charter

C. SOW

D. WBS

9. In the WBS, ________ hours is the suggested longest task duration.

A. 20

B. 8

C. 40

D. 60

10. Historical information is a ________, not a _________.

A. Nuisance, fact

B. Guideline, blueprint

C. Fact, guess

D. Panacea, problem

11. Historical information can be used as a guide, not as a blueprint because eachproject is ________.

A. Tactical


11/18

B. Important

C. Unique

D. Planned

12. Equipment, materials, and people are three types of choices in ________.

A. Scope Statements

B. WBS

C. SOW

D. Resource pool description

13. ________ of resources play(s) an important part in how you choose people and

materials for your project.

A. Descriptions

B. Firing

C. Cost

D. Quality

14. Choosing to do a task in house or to outsource it may be an example of a(n)________.

A. Tactical decision

B. Strategic decision

C. Management decision

D. Organizational policy

15. When you are choosing a certain level of skills or mechanical efficiency, youare trading ________ for time.

A. Cost

B. Quality

C. People

D. Ideas

16. The first place to look for expert judgment is often in ________.

A. PMI

B. Relatives


12/18

C. Your own organization

D. A vendor's organization

17. In order to use a consultant well, you need to have your own _______ and

_______ clearly understood as you engage the consultants.

A. People, managers

B. Expectations, requirements

C. Tasks, strategy

D. Requirements, hopes

18. When using either associations or industry groups, it is always important to

know what ________ went into the final numbers.

A. Thinking

B. Data

C. Tactics

D. Skills

19. To determine the final number of resources needed for a large task, you________ the ________ levels to get the next level higher.

A. Sum, lower

B. Divide, average

C. Multiply, higher

D. Sum, higher

20. An estimate that has the range of 25% to +75 is called a(n) ________ estimate.

A. Definitive

B. Budget

C. Order of magnitude

D. Strategic

21. The budget that has the range of 5% to +10% is called a(n) ________ estimate.

A. Capital

B. Order of magnitude

C. Budget


13/18

D. Definitive

22. The budget that has the range of 10% to +25% is called a(n) ________estimate.

A. Budget

B. Order of magnitude

C. Definitive

D. Capital

23. Developing an approximation of the costs of the resources needed to completeproject activity is ________.

A. Accounting

B. Cost control

C. Cost estimating

D. Budgeting

24. Project team knowledge, commercial cost-estimating databases, and projectfiles are all part of ________ used as an input into cost estimating.

A. Resource requirementsB. Estimating software

C. Historical information

D. Public information

25. The document that shows the correct accounting category to list various costestimates is called the ________.

A. Accounting system

B. Chart of accounts

C. Accounting method

D. Standard accounts

26. Evaluating ________ is part of cost estimating.

A. Schedules

B. Personnel

C. Assignments


14/18

D. Risks

27. Estimating cost by looking at previous projects is known as ________estimating.

A. Analytical

B. Analogous

C. Strategic

D. Bid

28. Analogous estimating is also known as ________ estimating.

A. Bottom-up

B. Parametric

C. Top-down

D. Top-to-bottom

29. Summing the total of WBS tasks to find the total cost is known as ________estimating.

A. Top-down

B. Analytical

C. Parametric

D. Bottom-up

30. If you are using models that look at project characteristics to do costestimating, you are doing ________.

A. Parametric modeling

B. Analytical thinking

C. Acute cost analysis

D. Model characterization

31. In general, ________ estimating gives the most accurate picture of costs fordoing cost estimating.

A. Analogous

B. Parametric modeling

C. Bottom-up


15/18

D. Top-down

32. It is likely that the ________ estimate is the one that people remember most.

A. Last

B. First

C. Summary

D. Capital

33. ________ is a major part of keeping track of a string of estimates.

A. Cost estimating

B. Version control

C. Summary tracking

D. Line item identification

34. The major output of cost budgeting is the ________.

A. Summary of costs

B. Capital budget

C. Cost baselineD. Capital baseline

35. Change requests should be noted ________ when they occur and become apart of the project record.

A. Often

B. Tactically

C. Permanently

D. Orally

36. If you think that the costs you have incurred up to now are in some wayatypical of the project and that the rest of the project will cost the originalestimate, the formula for finding the EAC is:

A. EAC = (AC + (BAC-EV)/CPI)

B. EAC=AC + ETC

C. EAC=AC + BAC-EV.

D. EAC=AC + EV


16/18

37. If you think that the costs you have incurred up to now are an indicator of whatwill happen for the rest of the project your formula for finding the EAC is:


B. EAC=AC + ETC

C. EAC=AC + BAC-EV.

D. EAC=AC + EV

38. The CPI used in the above formula is a(n) ________.

A. Actual cost

B. Cost control

C. Cost schedule

D. Performance factor

39. If you think that the costs to be incurred for the rest of the project wereincorrectly estimated and use a new estimate for your EAC, the formula is:


B. EAC=AC + ETC

C. EAC=AC + BAC-EV.

D. EAC=AC +EV

40. The abbreviation for the amount that was budgeted in order for work to beperformed is:

A. EV

B. AC

C. PV

D. DC

41. The abbreviation for costs actually incurred is:

A. EV

B. AC

C. PV

D. DC


17/18

42. ________ are costs that are not recoverable.

A. Capital costs

B. Real costs

C. Sunk costs

D. Overhead costs

43. The amount of time it takes to recover the expenditure for the project beforeyou begin to actually generate revenue is known as the ________.

A. Return on investment

B. Payback period

C. Selection period

D. Return period

44. You can go from _______ to accelerated depreciation from one year to thefollowing year but not the reverse.

A. Straight line depreciation

B. Capital expenditure methodology

C. Direct cost capitalization

D. Intermediate depreciation

45. The best way to get a good bid from the vendor is to write a good ________document.

A. Letter

B. Request

C. Risk Statement

D. Quality

46. Detail of the WBS for doing your budgeting is found in the ________.

A. SOW

B. WBS dictionary

C. Schedule

D. Charter


18/18

47. Costs that are expected to occur but the time when they will occur is notknown are called?

A. Indirect

B. Tactical

C. Direct

D. Known unknowns

48. What is your SPI if EV = 8 and PV = 6?

A. 1.33

B. .66

C. 1.0

D. .75

49. What is your SPI if PV = 8 and EV = 6?

A. 1.0

B. .75

C. 1.33

D. 2.0

cost management mock exam

Documents