PMP Exam Mentoring Ch 7 Project Cost Management

1.Early in the project’s planning phase, the project team determined that the cost to install the server would be $15,000. This is a high-level estimate, and the team thinks it may cost up to $10,000 more.

What kind of estimate is this?

• A. Definitive estimate

• B. Rough order of magnitude estimate

• C. Wide Estimate

• D. Plan Estimate

2. A team of efficiency experts hired by your company has concluded that the transportation costs associated with yourproject are excessive. You have been requested by the sponsor to cut the costs.

What is your best course of action?

• A. Perform a root cause analysis

• B. Conduct a cost reduction analysis

• C. Carry out a trend analysis

• D. Fast tracking

3. You are planning a research and development project, and you need to determine how the project costs will beestimated, budgeted, managed, monitored, and controlled. To complete this process, you need to know if there are any preapproved financial resources from which the detailed project costs can be developed.

What should you do next?

• A. Consult the cost management plan

• B. Review the project charter

• C. Examine the basis of estimates for the project

• D. Check the cost baseline

4. While working on a game design project, the project sponsor has asked the project manager that to ensure that his estimates are very precise.

What estimating technique should the project manager use?

• A. Analogous Estimate

• B. Bottom-up estimating

• C. Accuracy Estimating

• D. Oversight Estimating

5. A company must decide between renovating an existing building or constructing a new one. Each approach would requirean initial investment of $250,000. The renovation has a payback period of 2.5 years whereas the new construction has apayback period of 4.5 years. Your company president would need to make the final decision. All else being equal, which approach should you recommend as the better investment?

• A. The construction of a new office building

• B. The renovation of the current office building

• C. There is not enough information to make a decision

• D. Both options are equal since the initial investment is the same

6. You are managing a hotel construction project, and you have asked your project team to calculate the current earnedvalue metrics to determine the project performance. Your team reports back that the project's to-complete performanceindex (TCPI) is 0.9 based on the budget at completion (BAC).

Which of the following is true regarding your project's current situation as reflected by this TCPI value?

• A. The project is within budget

• B. The project is over budget

• C. The project is behind schedule

• D. The project is ahead of schedule

7. During project initiation, the project manager had provided an initial estimate of $250,000 with a range of -25% to +75%.The project is now in planning, and, as part of the Estimate Costs process, the project manager has to refine this estimateto a much narrower range.

How should the project manager determine the estimating methods that can be used and the accuracy required for thecost estimate?

• A. Review the cost management plan

• B. Examine the basis of estimates

• C. Contact the finance department

• D. Check the project charter

8. You are leading a project to be developed incrementally in small releases. Requirements have been established for the initialrelease. Feedback from a focus group will determine the scope of each subsequent release. The client has established astrict budget for the entire project.

In this adaptive environment, which is the best way to proceed?

• A. Use a traditional waterfall approach for the project

• B. Add prioritized features to the project scope with each release until the budget is exhausted

• C. During initial project planning, develop a detailed budget for each release

• D. Use a change control board (CCB) to prevent scope creep

9. The project team has just completed its fourth sprint. As part of the Control Costs process, you determine that the team'saverage velocity is 25 points per sprint, and the team has earned 1/3 of the total number of story points required to completethe entire project. The average cost per story point is $575.

What is the estimate to complete the remaining work?

• A. $57,500

• B. $115,000

• C. $14,375

• D. $172,500

10. While monitoring project work, the project manager notices an increase in actual costs that have not been accounted for inthe original budget. To understand whether a change request to update the cost baseline should be submitted, the project manager gathers raw observations and measurements of all of the costs that have been authorized, incurred, invoiced, andpaid.

What has the project manager gathered?

• A. Planned value

• B. Earned value

• C. Work performance information

• D. Work performance data