Cost (Chapter 7)

A project manager has recently been given a promotion and become the sponsor of a new initiative within her company. Given her past success in managing similar projects, the organization’s project steering committee asks her to submit a high-level project estimate that will be reviewed next week to decide on whether or not to initiate the project.

What is the best course of action for the new sponsor?

• Get a professional estimate from external subject matter experts

• Use her own expert judgment and some historical information

• Use the WBS to create an accurate bottom-up estimate

• Work with the project team to create the requested estimate

A senior executive suggests initiating a project to replace a significant portion of the company’s labor force with an automated production line. Other company executives are skeptical that this approach is the best way to increase profit margins and wonder if they are ready to sponsor such an effort.

What is the best first thing that should be done in this scenario?

• Performing a needs assessment

• Consulting with the project management office

• Appointing a project sponsor to create a project charter

• Providing a project manager with the authority to apply organizational resources

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

What should be done next?

• Perform a root cause analysis

• Conduct a cost reduction analysis

• Carry out a trend analysis

• Use a decision tree analysis

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 the estimate a much narrower range.

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

• Review the cost management plan

• Examine the basis of estimate

• Contact the finance department

• Check the project charter

On a project, several programmers were hired as independent contractors to supplement the in-house programmers to ensure the timely completion of the project. Toward the end of the project, the project manager performed some analysis and determined that CPI was 0.8 and the SPI was 1.2.

What is the best course of action to bring project performance back into alignment with the project management plan?

• Approve the use of overtime for the in-house programmers

• Reduce or eliminate the independent contractors

• Perform fast tracking to address the performance gap

• Eliminate the non-essential features from the project scope

As part of monitoring and controlling costs for your project, you need to calculate a cost variance (CV). You have already determined that $22,000 has been spent thus far on the project.

In order to calculate the CV, what should you do next?

• Check the project cost management plan

• Examine the quality control measurements

• Look up the budget at completion for the project

• Review the cost baseline and the project schedule

The plan for the first iteration was to complete 80 story points. However, the team was only able to complete 60. Each story point earns $1,000 for the project. The actual cost of the iteration was $70,000. As the iteration retrospective approaches, the scrum master requests that the team prepares all the data required to calculate the various earned value metrics.

At the retrospective, the team determine that the costs performance index (CPI) of the iteration was ………………

• 1.333

• 0.750

• 1.143

• 0.857

In preparation for an upcoming project status meeting, you have determined the value of the work completed thus far is $100,000 with a budget at completion (BAC) of $1,000,000. At this point in the project, you have spent 12% of the project budget. The value of work planned to be completed at this point is $115,000.

What will you report at the project status meeting?

• The project is performing well in terms of cost but not in terms of schedule

• The project is not performing well both in terms of cost and schedule

• The project is currently behind schedule

• The project is currently over budget

A project manager is leading a software development project for an important client. The following table represents the current project status. According to the project schedule, system analysis, system design, and the system development should now be complete. The method used to determine the earned value is based on percent complete.

What is the project’s current schedule variance, and what does this mean for the project?

• The schedule variance is -$12,500, and the project performance is unknown

• The schedule variance is -$12,500, and the project is running behind schedule

• The schedule variance is -$12,500, and the project is running ahead of schedule

• The schedule variance is $12,500, and the project is running behind the schedule

You are managing a project with a budget of $20,000. You have spent $17,000 so far, and the project is 75% complete. You have performed a variance analysis and determined that the estimate at completion (EAC) will be $22,667.

What is the efficiency that must be maintained in order to complete the project with the current EAC?

• 1.667

• 1.353

• 1.133

• 0.882