Project Cost Management

1. Scenario:

Your project's cost baseline is $500,000. Midway through the project, you've spent $300,000, and the Earned Value (EV) is $250,000. What does this indicate?

A. The project is under budget
B. The project is over budget
C. The project is ahead of schedule
D. The project is on budget

✅ Answer: B. The project is over budget
Explanation: You've spent more ($300,000) than the value of the work completed ($250,000). This is a cost overrun.

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2. Scenario:

A client requests a feature addition. Your cost estimates increase by $50,000. Before adjusting the budget, what should you do?

A. Inform the client of new costs
B. Update the cost baseline
C. Submit a change request
D. Modify the scope

✅ Answer: C. Submit a change request
Explanation: Changes that affect cost must go through integrated change control and be formally approved before budget adjustments.

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3. Scenario:

Your CPI (Cost Performance Index) is 1.1. What does this mean?

A. Project is over budget
B. Project is ahead of schedule
C. Project is under budget
D. Project is behind schedule

✅ Answer: C. Project is under budget
Explanation: CPI > 1 means cost efficiency — you're getting more value for each dollar spent.

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4. Scenario:

While monitoring your project, you find that both CPI and SPI are less than 1. What action should you take?

A. Proceed as planned
B. Re-baseline the schedule
C. Evaluate performance issues and corrective actions
D. Increase team size

✅ Answer: C. Evaluate performance issues and corrective actions
Explanation: Both cost and schedule are underperforming — this calls for performance evaluation and corrective planning.

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5. Scenario:

During budgeting, you want to include contingency reserves. What type of cost is this?

A. Direct cost
B. Indirect cost
C. Management reserve
D. Known-unknowns (Contingency reserve)

✅ Answer: D. Known-unknowns (Contingency reserve)
Explanation: Contingency reserves are for known risks that are identified and estimated.

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6. Scenario:

The client requests you to provide a forecast of the final project cost based on current performance. What formula should you use?

A. BAC + AC
B. EV + AC
C. EAC = BAC / CPI
D. ETC = BAC – EV

✅ Answer: C. EAC = BAC / CPI
Explanation: Estimate at Completion (EAC) helps forecast the total cost if performance continues at the current rate.

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7. Scenario:

You find out that a key vendor has increased prices, impacting your budget. What should you update?

A. Cost management plan
B. Risk register
C. Project charter
D. Cost baseline

✅ Answer: B. Risk register
Explanation: Price increase is a risk (cost-related) and should be documented. You may then analyze the impact and update the cost baseline if needed.

Below are some  additional questions for Practice 



1. Which of the following provides the least accuracy in estimating?
a. Rough order of magnitude
b. Budget estimate
c. Definitive estimate
d. WBS estimate

2. Of the following, which one is the most reliable source of information for estimating project costs?
a. Historical information from a recently completed project
b. An SME’s opinion
c. Recollections of team members that have worked on similar projects
d. Vendor’s white paper

3. Which one of the following best describes analogous estimating
a. Regression analysis
b. Bottom-up estimating
c. Less accurate
d. More accurate

4. Which of the following steps would be considered the least desirable corrective action for a project that has an unfavorable SPI?
a. Revise activities on the critical path
b. Re-baseline to eliminate schedule variance
c. Crash the schedule
d. Review activities with positive float

5. The Performance Measurement Baseline includes the following:
a. Summary level planning packages, control account budgets, and undistributed budget
b. Indirect costs, control account budgets and management reserve
c. Direct costs, control account budgets and management reserve
d. Direct costs, indirect costs and management reserve

6. The _______is the point at which work is planned, progress is measured, and earned value is computed
a. Work package
b. Control account
c. Activity/Task
d. WBS element

7. Activity cost estimates are used as an input into which process?
a. Estimate Costs
b. Determine Budget
c. Analyze Costs
d. Control Costs
8. One of your members makes a change to the budget with your approval. In what process is he engaged?
a. Plan Costs
b. Estimate Costs
c. Cost Management
d. Control Costs
9. If earned value =$10,000, planned value= $8,000 and actual cost = $3,000, what is the schedule variance?
a. -$2,000
b. $2,000
c. $5,000
d. $-5,000
10. As a project manager, your BEST use of the project cost baseline would be to:
a. Measure and monitor cost performance on the project
b. Track approved changes
c. Calculate team performance bonuses
d. Measure and report on variable project costs
11. If you have a schedule variance of $500, this would indicate:
a. Planned value is less than earned value
b. Earned value is less than the estimate to complete
c. Actual cost is less than earned value
d. The ratio of earned value to planned value is 5:1


12. If budget at completion = $ 500, estimate to complete = $400, earned value= $100, and actual cost = $100, what is the estimate at complete?
a. $0
b. $150
c. $350
d. $500
13. Project A would yield $100,000 in benefit. Project B would yield $250,000 in benefit. Due to limited resources your company can perform only one of these. They elect to perform Project B because of the higher benefit. What is the opportunity cost of performing B?
a. -$ 150,000
b. $ 150,000
c. -$ 100,000
d. $100,000
14. The difference between present value and net present value is
a. Present value is expressed as an interest rate, while net present value is expressed as a dollar figure
b. Present value is measure of the actual present value while net present value measures expected present value
c. Present value does not factor in costs
d. Present value is more accurate

15. Your schedule projected that you would reach 50% completion today on a road construction project that is paving 32 miles of new highway. Every 4 miles is scheduled to cost $5,000,000.Today, in your status meeting, you announced that you had completed 20 miles of the highway at a cost of $18,000,000. What is your planned value?
a. $12,800,000
b. $18,000,000
c. $20,000,000
d. $40,000,000

16. A task was scheduled to use two persons, full time, and take two weeks to

complete. Instead, the project manager was only able to assign one person to this

task. At the end of two weeks, the person assigned to the task completed 75% of the

work.  What is the cost performance index?

A.     0.75

B.     1.5

C.    1.33

D.    0.5

17. Which of the following may not be contained in the Cost Management Plan?

A.     Management Reserve

B.     Control Thresholds

C.    Cost Reporting requirement

D.    Rules of Performance Measurement

18. If the SPI of a Project is above 1 and the CPI is below 1, then the Project

Management may like to look into:

A.    Project risks

B.    Modification of some activities to do fast tracking

C.    Mix of the resources deployed in the Project

D.    Addition of resources to do crashing

19 A Project was scheduled to be performed by four resources for three weeks, working throughout the Project duration. During first week, only two resources were assigned, whereas during second week, two  more resources joined in. At the end of second week, 40% of the value of the work had been completed. What is the CPI for this Project at the end of second week?
A. 0.60
B. 0.75
C. 0.80
D. 1.66

20  Budget at completion of a 12 months project is 800000 USD.  It is currently month five. The CPI values under best case scenario, most likely scenario and the worst case scenarios are 1, .8, .6 ;   Based on the data available what is the forecasted cost at completion?

A.       800000 USD
B.       1 million  USD
C.       1.3 million USD
D.       None of the above

Answers
1. a - Rough order magnitude is the correct answer
2. a – Historical information from a recently completed project
3. c – less accurate
4. b - Re-baseline to eliminate schedule variance
5. a
6. a – Work Package
7. b
8. d
9. b
10. a
11. a
12. d
13. d
14. c
15. c
16. b
17. a
18. C
19. C
20. B

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