PMI PMP Financial Planning and Cost Control Practice Test

 

Topic 15 covers financial planning and cost control for the PMI Project Management Professional (PMP) certification. These original scenarios apply the July 2026 exam objectives across predictive, agile and hybrid projects. Use the stated constraints to select one answer unless the question specifies otherwise. For broader preparation, visit the PMP Exam Dumps page. Each option has an explanation of its role in the decision.

Question 1

A project needs an initial funding range tomorrow. Detailed work packages do not yet exist, but a completed project has a similar purpose and known costs. What is the most defensible estimating approach now?

1. Build a work-package total from standard task-hour allowances before the project’s work packages are defined.
2. Use an adjusted analogous estimate and document the differences and uncertainty.
3. Use a single supplier’s preliminary quote as the complete project funding estimate.
4. Copy the prior project’s final cost with no adjustment.
5. Set the estimate equal to the sponsor’s preferred spending limit.

Correct Answer: B

 

Correct Answer

Answer B is correct because the comparable project supplies an evidence base suitable for an early estimate. Explicit adjustments and a range acknowledge that limited design detail does not justify precise bottom-up quantities.

Incorrect Answers

Answer A is incorrect because standard allowances can inform an early estimate, but they do not establish project-specific quantities that are not yet known. An adjusted analogous range better represents the available evidence without implying unsupported bottom-up detail.

Answer C is incorrect because a supplier quote may cover only part of the initiative and may contain untested assumptions. The funding decision needs an estimate of the whole project, with a scope basis and uncertainty appropriate to its early stage.

Answer D is incorrect because similarity does not mean identity. Differences in scale, timing, technical conditions, or scope need assessment before the historical amount can inform this project.

Answer E is incorrect because a funding ceiling is a constraint, not evidence of the cost of required work. Treating it as an estimate hides feasibility rather than testing it.

 

Question 2

A validated installation model estimates $45 per meter for work comparable to this project. The required length is 600 meters, and a separate $8,000 mobilization charge is not included in the unit rate. What is the base estimate before reserves?

1. $27,000.
2. $35,000 plus an automatic 10% contingency.
3. Use $27,000 as the base and classify mobilization as management reserve.
4. $43,000.
5. $35,000.

Correct Answer: E

 

Correct Answer

Answer E is correct because variable cost is 600 x $45 = $27,000. Adding the separate $8,000 mobilization gives $35,000, with no reserve included because none is specified.

Incorrect Answers

Answer A is incorrect because this includes the measured installation quantity but omits mobilization. The stem explicitly states that the $45 rate excludes that fixed component.

Answer B is incorrect because the base estimate is $35,000, but the question asks before reserves and gives no ten-percent rule. A contingency should follow the project’s stated risk and budgeting basis.

Answer C is incorrect because mobilization is a known required cost, not unspecified future work. Moving its $8,000 into management reserve would understate the base estimate for the defined installation.

Answer D is incorrect because this adds mobilization twice. Only one $8,000 charge is required, and the rate contains none of it.

 

Question 3

Two work-package estimates are $40,000 and $50,000. Each includes the same $10,000 shared license, and only one license is required for the project. All other costs are distinct. What is the correct aggregate estimate?

1. $70,000.
2. $80,000.
3. $90,000.
4. $50,000.
5. $100,000.

Correct Answer: B

 

Correct Answer

Answer B is correct because the raw sum is $90,000, but it contains two entries for one $10,000 license. Removing one duplicate yields $80,000 while retaining the legitimate license cost once.

Incorrect Answers

Answer A is incorrect because this removes both license entries and leaves no allowance for the license actually required. Only the duplicate should be removed.

Answer C is incorrect because summing the packages without reconciling overlap counts the same shared license twice. Bottom-up detail still requires checking the boundaries between estimates.

Answer D is incorrect because the packages contain different work apart from the license. Selecting only the larger estimate would discard the distinct costs in the other package.

Answer E is incorrect because the shared license is already included in each estimate. Adding another $10,000 creates a third charge rather than correcting the duplication.

 

Question 4

An organization uses the three-point formula (optimistic + 4 x most likely + pessimistic) / 6 for this estimate. A work package has estimates of $20,000, $32,000, and $56,000 respectively. What estimate follows the rule?

1. $32,000.
2. $204,000.
3. $34,000.
4. $36,000.
5. $38,000.

Correct Answer: C

 

Correct Answer

Answer C is correct because the numerator is $20,000 + 4 x $32,000 + $56,000 = $204,000. Dividing by six gives $34,000; the most likely amount receives four times either endpoint’s weight.

Incorrect Answers

Answer A is incorrect because choosing the most likely value alone discards the information in the optimistic and pessimistic estimates. The organization’s specified calculation uses all three.

Answer B is incorrect because this is the weighted numerator before division. The weights sum to six, so the total must be divided by six to obtain the estimate.

Answer D is incorrect because this is the unweighted mean of the three values. It would match a different stated method, but not the fourfold weighting required here.

Answer E is incorrect because this is the midpoint of the two endpoints and ignores the most likely estimate. It therefore does not apply the supplied three-point rule.

 

Question 5

For a prototype, the cost team explicitly uses a triangular mean: (optimistic + most likely + pessimistic) / 3. The values are $12,000, $18,000, and $30,000. Which conclusion is justified?

1. The maximum possible cost is $20,000.
2. The estimate is $19,000 because the most likely value receives fourfold weight.
3. The base estimate must be $30,000 because uncertainty remains.
4. There is a 90% probability that cost will be below $20,000.
5. The mean estimate is $20,000; it is not a guaranteed maximum.

Correct Answer: E

 

Correct Answer

Answer E is correct because the three values sum to $60,000, giving a $20,000 mean. An average is a central estimate and does not establish a cap or a specified confidence level.

Incorrect Answers

Answer A is incorrect because a mean is not an upper bound. Even the supplied pessimistic input is $30,000, so a $20,000 cap is unsupported.

Answer B is incorrect because $19,000 follows a different weighting rule. The scenario explicitly instructs the estimator to use the unweighted triangular mean.

Answer C is incorrect because a pessimistic input can inform risk decisions but does not replace the organization’s specified mean calculation. Reserve decisions should remain explicit.

Answer D is incorrect because the scenario provides no such confidence calculation. A mean alone does not identify the probability of meeting that amount.

 

Question 6

Two teams estimate the same initiative at substantially different totals. One excludes migration and uses current rates; the other includes migration and next year’s rates. Which TWO elements must be reconciled before comparing estimating accuracy? Choose TWO.

1. The included scope and exclusions in each estimate.
2. The price date and labor-rate assumptions.
3. The historical variance of each team’s previous estimates.
4. The degree of detail in each team’s estimating spreadsheet.
5. The midpoint between the two submitted totals.
6. The narrower confidence interval offered by either team.

Correct Answers: A, B

 

Correct Answers

Answer A is correct because different work boundaries create different legitimate totals. The teams must first establish whether they are estimating the same deliverable before judging their methods or precision.

Answer B is correct because current and future rates can differ even for identical quantities. Normalizing the price basis separates economic assumptions from differences in the estimated work.

Incorrect Answers

Answer C is incorrect because past performance can inform confidence in an estimator, but it does not reconcile the specific migration and rate differences in these submissions. Judging accuracy now requires a common estimate basis.

Answer D is incorrect because detail can support review, but it does not by itself align included migration work or rate dates. A highly detailed estimate can still cover a different scope and economic basis.

Answer E is incorrect because averaging could conceal the scope and rate differences without resolving them. The resulting figure would not have a clear basis for what work and price period it represents.

Answer F is incorrect because a narrower interval may concern uncertainty within one estimate, but it does not make different scope and rate assumptions comparable. The baseline of comparison has to be aligned first.

 

Question 7

Under this organization’s policy, the cost baseline includes planned work and contingency reserve but excludes management reserve. Planned work is $500,000, contingency is $50,000, and management reserve is $30,000. What are the baseline and total project budget?

1. Baseline $530,000; total budget $580,000.
2. Baseline $550,000; total budget $550,000.
3. Baseline $500,000; total budget $580,000.
4. Baseline $550,000; total budget $580,000.
5. Baseline $580,000; total budget $580,000.

Correct Answer: D

 

Correct Answer

Answer D is correct because the policy puts planned work plus contingency in the baseline: $500,000 + $50,000. Adding the separate $30,000 management reserve gives the total authorized project budget.

Incorrect Answers

Answer A is incorrect because this adds management reserve while excluding contingency, reversing their specified treatment. The categories must follow the organization’s stated budgeting rule.

Answer B is incorrect because the baseline is correct, but the total omits the separately authorized management reserve. Total project budget includes both components.

Answer C is incorrect because the total is correct, but the baseline excludes contingency despite the explicit policy. The planned risk allowance belongs inside this baseline.

Answer E is incorrect because this places management reserve in the baseline before allocation. The scenario’s policy requires it to remain outside the performance baseline.

 

Question 8

A known integration risk occurs. The approved response costs $12,000, already covered by its contingency allowance, and the project manager is authorized to use that allowance when this trigger occurs. Scope is unchanged. What should the project manager do?

1. Seek a fresh sponsor decision on the same trigger before starting the planned response.
2. Increase the total budget by $12,000 automatically.
3. Record the response against contingency but leave the estimate to complete and remaining reserve report unchanged.
4. Request management reserve before using the approved contingency.
5. Implement the response and record the contingency draw and revised forecast.

Correct Answer: E

 

Correct Answer

Answer E is correct because the event matches the planned trigger and delegated spending boundary. The project can execute the authorized response while preserving visibility of remaining reserve and expected cost.

Incorrect Answers

Answer A is incorrect because the sponsor’s delegated authority and the matching trigger already authorize this response. An unnecessary additional approval would delay execution without resolving a new scope or funding decision.

Answer B is incorrect because the amount is already included in the approved allowance. Using it does not itself require adding the same cost again to the total budget.

Answer C is incorrect because charging the correct allowance is only part of control. Consuming the reserve and implementing the response affect the remaining protection and may affect forecast work, which should be reflected in the current report.

Answer D is incorrect because the known risk already has an authorized allowance and response. Escalating to a separate reserve first adds a step unsupported by the stated policy.

 

Question 9

Unexpected in-scope work needs $20,000. Policy holds management reserve outside the cost baseline and gives the sponsor authority to allocate it. No allocation has been approved. Which TWO actions should the project manager take? Choose TWO.

1. Submit the work, cost basis, and reserve request to the sponsor.
2. Move $20,000 into the baseline immediately and seek retroactive approval.
3. Update the work-package budget after approval and leave the management reserve balance unchanged until expenditure occurs.
4. Record the authorized reserve transfer and update the affected baseline when approved.
5. Allocate reserve to the control account’s existing overrun before costing the unexpected work.
6. Record the unexpected work in the risk register and defer its funding decision to the next routine reporting cycle.

Correct Answers: A, D

 

Correct Answers

Answer A is correct because the need must be substantiated and approved by the stated reserve owner. A plausible in-scope issue does not itself transfer spending authority to the project manager.

Answer D is correct because an approved allocation changes where budget is available for future work. Traceable records preserve the link between reserve reduction and the newly budgeted scope.

Incorrect Answers

Answer B is incorrect because this bypasses the sponsor’s explicit allocation authority. The policy requires an approved transfer before treating reserve as work-package budget.

Answer C is incorrect because allocation transfers budget from reserve to planned work when approved, not only when cash is spent. Leaving both balances intact would overstate the authorization still available for other needs.

Answer E is incorrect because the request is for newly identified in-scope effort and needs its own cost basis. Reallocating reserve to a past overrun does not establish the amount or approval needed to perform that remaining work.

Answer F is incorrect because this is a known need for in-scope work, not merely a potential future event. The sponsor needs a supported allocation request so the required work and its budget can be authorized before it is committed.

 

Question 10

At the same status date, a project has earned value (EV) of $90,000 and actual cost (AC) of $100,000. What are its cost variance (CV) and cost performance index (CPI)?

1. A favorable $10,000 CV and CPI = 1.11.
2. A favorable $10,000 CV and CPI = 0.90.
3. An unfavorable $10,000 CV and CPI = 0.10.
4. An unfavorable $10,000 CV and CPI = 0.90.
5. An unfavorable $10,000 CV and CPI = 1.11.

Correct Answer: D

 

Correct Answer

Answer D is correct because cost variance is EV – AC = $90,000 – $100,000. CPI is EV / AC = 0.90, meaning each dollar spent has earned ninety cents of budgeted work value.

Incorrect Answers

Answer A is incorrect because this reverses both comparisons, using AC – EV and AC / EV. Those operations would misleadingly suggest favorable efficiency for work that cost more than its budgeted value.

Answer B is incorrect because the index is correct but the variance sign is reversed. A positive cost variance would mean earned value exceeds actual cost, which is not the case.

Answer C is incorrect because the $10,000 overrun is 10% of actual cost, but that loss fraction is not CPI. CPI compares the full $90,000 earned value with $100,000 actual cost and therefore equals 0.90.

Answer E is incorrect because the variance sign is correct, but the ratio is inverted. CPI divides earned value by actual cost, so this overrun produces a value below one.

 

Question 11

A manager reports good cost performance because actual cost is $100,000 against planned value of $150,000. At the same cutoff, earned value is only $90,000. What is the sound interpretation?

1. The project is saving one third of every unit of completed work.
2. Spending is below plan, but completed work is costing more than budgeted.
3. The project must have completed more work than planned.
4. The project has a favorable $50,000 cost variance.
5. The original budget should be reduced by $50,000 immediately.

Correct Answer: B

 

Correct Answer

Answer B is correct because actual cost is below PV because less work has been earned than planned. EV – AC is -$10,000, so the work actually performed has an unfavorable cost variance despite the lower cash-like total.

Incorrect Answers

Answer A is incorrect because the $50,000 gap to planned value does not measure unit cost efficiency. Actual cost exceeds earned value, which indicates the opposite for completed work.

Answer C is incorrect because earned value of $90,000 is below PV of $150,000. The evidence shows less budgeted work accomplished, not more.

Answer D is incorrect because the difference PV – AC compares scheduled spending with actual cost and ignores how much work was performed. EVM cost variance compares EV with AC.

Answer E is incorrect because unperformed work may still require its budget, and completed work is already over cost. A baseline reduction based on underspending alone would ignore both facts.

 

Question 12

A project recognizes earned value for completed supplier work this month, but the invoice will arrive next month. Its accounting policy requires accruing incurred costs at the work-period cutoff. Which TWO actions protect the cost report? Choose TWO.

1. Obtain a supported accrual for the work completed this month.
2. Increase the baseline to match the estimated invoice.
3. Report a favorable CPI now and postpone all cost recognition until payment.
4. Add the full invoice on top of the unchanged accrual next month.
5. Remove the earned value solely because the invoice has not arrived.
6. Reconcile the accrual to the eventual invoice without counting both as new cost.

Correct Answers: A, F

 

Correct Answers

Answer A is correct because the policy aligns incurred cost with the period in which the work was performed. An estimate supported by delivery evidence prevents a temporarily understated actual-cost denominator.

Answer F is correct because the later invoice settles or adjusts an already recognized amount. Reconciliation keeps the final actual cost accurate while avoiding duplicate recognition.

Incorrect Answers

Answer B is incorrect because recording actual cost does not authorize a budget change. The baseline and incurred-cost records serve different purposes.

Answer C is incorrect because payment timing is not the stated accounting basis. This would compare earned work with incomplete actual cost and exaggerate efficiency.

Answer D is incorrect because both records represent the same work. Leaving both as separate cost would overstate actuals and create an artificial unfavorable variance.

Answer E is incorrect because earned value follows accomplishment under the measurement rule, not supplier billing timing. The missing cost should be addressed through the required accrual.

 

Question 13

Budget at completion (BAC) is $500,000, EV is $200,000, and AC is $250,000. The cost team expects the current cumulative cost efficiency to continue for all remaining work. What is the estimate at completion (EAC)?

1. $550,000.
2. $875,000.
3. $400,000.
4. $625,000.
5. $500,000.

Correct Answer: D

 

Correct Answer

Answer D is correct because the cost index is CPI = $200,000 / $250,000 = 0.80. With that efficiency continuing, EAC = BAC / CPI = $625,000, equivalent to AC plus the remaining $300,000 budgeted work divided by 0.80.

Incorrect Answers

Answer A is incorrect because the expression AC + (BAC – EV) gives this result but assumes remaining work is performed at its budgeted rate. That conflicts with the stated expectation of continuing 0.80 efficiency.

Answer B is incorrect because adding AC to BAC / CPI double counts past cost because BAC / CPI already estimates the full project cost. AC is added only when the other term represents remaining work.

Answer C is incorrect because multiplying BAC by CPI reduces the forecast when efficiency is poor. Remaining work needs more actual cost per unit of earned value, so division is required.

Answer E is incorrect because keeping EAC equal to BAC assumes recovery sufficient to eliminate the overrun. No such improvement is supported by the persistent-efficiency assumption.

 

Question 14

A project has BAC $400,000, EV $160,000, and AC $190,000. The entire unfavorable variance came from a resolved one-time event. A reviewed plan supports completing the remaining work at its original budgeted cost. What EAC fits these assumptions?

1. $400,000.
2. $430,000.
3. $240,000.
4. $590,000.
5. $475,000.

Correct Answer: B

 

Correct Answer

Answer B is correct because the appropriate forecast is EAC = AC + (BAC – EV) = $190,000 + $240,000. The one-time $30,000 overrun remains in actual cost, while future work uses its original budgeted amount.

Incorrect Answers

Answer A is incorrect because returning to budgeted efficiency does not recover the $30,000 already overspent. EAC equals BAC only if future savings offset that past overrun.

Answer C is incorrect because this is the budgeted cost of work remaining, not the total estimate at completion. The $190,000 already incurred must also be included.

Answer D is incorrect because adding full BAC to AC counts completed work twice. Only the unearned portion, BAC – EV, belongs in the remaining-cost term.

Answer E is incorrect because this extrapolates cumulative CPI to all remaining work. It treats the resolved event as recurring, contrary to the reviewed remaining-work assumption.

 

Question 15

A forecast model assumes both current cost and schedule efficiency will affect remaining cost and requires EAC = AC + (BAC – EV) / (CPI x SPI). BAC is $600,000, EV $240,000, AC $300,000, and planned value (PV) $300,000. What is EAC under this model?

500. $862,500.
501. $750,000.
502. $937,500.
503. $562,500.
504. $660,000.

Correct Answer: A

 

Correct Answer

Answer A is correct because the indexes CPI and SPI are both $240,000 / $300,000 = 0.80. Remaining budgeted work is $360,000; dividing by 0.64 gives $562,500, then adding AC gives $862,500.

Incorrect Answers

Answer B is incorrect because this applies CPI alone: $300,000 + $360,000 / 0.80. The selected model also applies SPI, so it produces a larger remaining-cost estimate.

Answer C is incorrect because dividing the entire BAC by CPI x SPI applies the composite factor to already performed work as well. The specified formula adjusts only the remaining budgeted work.

Answer D is incorrect because this is the estimate to complete under the composite factor. It omits the $300,000 already incurred and is therefore not EAC.

Answer E is incorrect because this adds remaining budgeted work to AC with no efficiency adjustment. It assumes future work occurs at budgeted cost, contrary to the stated composite model.

 

Question 16

A hybrid project has completed an expensive hardware phase and is entering software deployment. Forecasts based on cumulative CPI and CPI x SPI differ substantially. The sponsor asks for the most credible forecast, not simply the lowest one. Which TWO analyses should the cost team perform? Choose TWO.

1. Average all formula outputs without documenting their assumptions.
2. Use the software phase’s estimate to complete as the reported total so the hardware overrun does not bias the forecast.
3. Determine whether schedule inefficiency will create additional remaining costs.
4. Choose whichever formula returns the approved budget most closely.
5. Choose the CPI-only forecast because adaptive deployment is expected to recover schedule delay.
6. Assess whether the hardware cost drivers will recur in remaining work.

Correct Answers: C, F

 

Correct Answers

Answer C is correct because a composite factor is meaningful only when schedule performance is expected to influence cost. The team should examine actual time-dependent resources and dependencies rather than multiply indexes automatically.

Answer F is correct because a cumulative index carries past conditions forward. If the completed phase has materially different drivers, a remaining-work estimate may be more credible than mechanically extending that history.

Incorrect Answers

Answer A is incorrect because incompatible forecasts do not become credible merely by averaging them. The team must understand which conditions each model represents.

Answer B is incorrect because phase-specific estimating can improve the remaining forecast, but total EAC must also include actual hardware cost already incurred. Omitting that cost understates the total rather than removing an inappropriate future driver.

Answer D is incorrect because proximity to the budget does not establish forecasting accuracy. It would select assumptions to fit a preferred result instead of testing the remaining work.

Answer E is incorrect because an adaptive label alone does not establish recovery or show that delay has no future cost effect. The choice needs evidence about remaining resources and time-dependent costs, as well as the relevance of past hardware performance.

 

Question 17

Actual cost is $275,000. After a scope-neutral technical review, the team estimates all remaining work bottom-up at $340,000; that estimate excludes costs already incurred. BAC remains $580,000. What are EAC and variance at completion (VAC)?

1. EAC $615,000; VAC indicates a $35,000 saving.
2. EAC $855,000; VAC -$275,000.
3. EAC $340,000; VAC $240,000.
4. EAC $615,000; VAC indicates a $35,000 overrun.
5. EAC $580,000; VAC zero.

Correct Answer: D

 

Correct Answer

Answer D is correct because the total EAC is $275,000 + $340,000 = $615,000. VAC = BAC – EAC = $580,000 – $615,000, indicating a forecast overrun of $35,000.

Incorrect Answers

Answer A is incorrect because the EAC is correct but the variance sign is reversed. VAC subtracts forecast cost from budget, so an overrun is negative.

Answer B is incorrect because adding BAC to AC counts completed work twice and ignores the reviewed ETC. The forecast must combine actual cost with the remaining estimate.

Answer C is incorrect because this treats the remaining-work estimate as a total and omits actual cost. The $340,000 figure is explicitly ETC, not EAC.

Answer E is incorrect because the BAC is the approved budget, not automatically the current forecast. The fresh remaining-work estimate indicates that completion is expected to cost more.

 

Question 18

A project’s BAC is $800,000, AC is $350,000, and its accepted EAC is $900,000. Which THREE statements correctly describe this forecast? Choose THREE.

1. The expected total cost is $900,000.
2. The approved budget automatically becomes $900,000.
3. The variance at completion is -$100,000.
4. The expected future cost is $900,000.
5. The estimate to complete is $550,000.
6. The forecast includes a $100,000 saving against budget.

Correct Answers: A, C, E

 

Correct Answers

Answer A is correct because the EAC combines cost already incurred with the forecast remaining cost. It is a total completion estimate, not an additional amount on top of actual cost.

Answer C is correct because the forecast variance is VAC = BAC – EAC = $800,000 – $900,000. Its negative sign indicates that forecast cost exceeds the approved budget.

Answer E is correct because the remaining estimate is ETC = EAC – AC = $900,000 – $350,000. This isolates expected future expenditure from the total forecast.

Incorrect Answers

Answer B is incorrect because accepting a forecast does not itself authorize a budget change. BAC changes through the applicable approval process, not merely because expected cost rises.

Answer D is incorrect because this treats the total EAC as an additional cost and would double count the $350,000 already incurred. Future cost is the smaller ETC.

Answer F is incorrect because the EAC is above BAC, so the difference is an overrun rather than a saving. Reversing that interpretation misstates the financial outlook.

 

Question 19

BAC is $500,000, EV is $200,000, and AC is $260,000. Management asks what cost efficiency is required on the remaining work to finish at the original BAC. What is the to-complete performance index for that target, TCPI(BAC)?

1. 0.80.
2. 1.00.
3. 1.50.
4. 0.77, approximately.
5. 1.25.

Correct Answer: E

 

Correct Answer

Answer E is correct because the required index is TCPI(BAC) = (BAC – EV) / (BAC – AC) = $300,000 / $240,000 = 1.25. The remaining work must earn $1.25 of budgeted value for each dollar spent.

Incorrect Answers

Answer A is incorrect because this reverses the TCPI ratio to $240,000 / $300,000. Required efficiency compares remaining work value with the money left to perform it.

Answer B is incorrect because budgeted efficiency on future work would leave the existing $60,000 overrun unrecovered. Finishing at BAC requires improvement beyond one-to-one efficiency.

Answer C is incorrect because this divides remaining work by EV rather than by remaining budget. Earned value already accomplished is not the funding available for future work.

Answer D is incorrect because the ratio EV / AC gives the cumulative CPI, about 0.769. That describes past efficiency, not the higher future efficiency needed to recover to the original budget.

 

Question 20

BAC is $600,000, EV $240,000, and AC $300,000. Management adopts a $750,000 completion target for evaluating required future performance; scope is unchanged. What TCPI applies to that target?

1. 0.48.
2. 0.40.
3. 0.80.
4. 1.25.
5. 1.20.

Correct Answer: C

 

Correct Answer

Answer C is correct because remaining budgeted work is $600,000 – $240,000 = $360,000. Money available under the target is $750,000 – $300,000 = $450,000, so TCPI(EAC) is 0.80.

Incorrect Answers

Answer A is incorrect because dividing remaining work by the entire EAC ignores cost already incurred. Only EAC – AC remains available for future work under that target.

Answer B is incorrect because the ratio EV / BAC is 0.40 and expresses the fraction of budgeted work earned so far. It is a completion measure, not the future cost efficiency required to meet the revised target.

Answer D is incorrect because this reverses the required-efficiency ratio, dividing available money by remaining work. TCPI expresses budgeted work value per unit of future cost.

Answer E is incorrect because this uses BAC – AC in the denominator and answers the original-budget question. Management specifically asks about the revised $750,000 target.

 

Question 21

BAC and AC are both $400,000, while EV is $300,000. Required work remains and will incur additional cost. What should the project manager conclude about finishing at the original BAC?

1. No budget remains for the unfinished work; a finite TCPI(BAC) cannot support that target.
2. TCPI(BAC) is 0.75, matching cumulative CPI.
3. TCPI(BAC) is zero, so no further efficiency is needed.
4. The remaining work can finish within BAC if future CPI is exactly 1.00.
5. Use $100,000 of remaining work value as the TCPI denominator because the original budget is exhausted.

Correct Answer: A

 

Correct Answer

Answer A is correct because remaining budget BAC – AC is zero while BAC – EV is $100,000. The TCPI denominator is zero, and the stated positive future cost makes the original total budget infeasible without an authorized change in circumstances.

Incorrect Answers

Answer B is incorrect because the ratio EV / AC is 0.75, but that measures past performance. It does not resolve the zero remaining-budget denominator for the original target.

Answer C is incorrect because division by zero does not yield zero. There is still positive work to perform and no money remaining within the original BAC.

Answer D is incorrect because one-to-one efficiency still requires $100,000 of additional cost. No finite positive efficiency can spend within a zero remaining allowance when cost is required.

Answer E is incorrect because the denominator represents money available within the target, not budgeted work remaining. Replacing zero remaining funding with work value produces a ratio that no longer tests completion at the original BAC.

 

Question 22

A project’s total approved budget covers its estimate, but funding is released quarterly. Next month’s planned commitments exceed the funds available before the following release. Policy prohibits commitments above available funding. Which TWO responses are appropriate? Choose TWO.

1. Seek an authorized funding-timing change or rephase work with impact analysis.
2. Negotiate invoice dates after the next funding release while retaining next month’s full purchase commitments.
3. Compare the spending and commitment profile with the funding-release schedule.
4. Use the unspent contingency balance as additional quarterly funding without checking its release date.
5. Split the purchase into smaller orders, each below the available quarterly funding, and authorize all of them now.
6. Commit the full amount because annual funding is already approved in principle.

Correct Answers: A, C

 

Correct Answers

Answer A is correct because either route can align commitments with available funds, but each has consequences. The project needs approval or a feasible revised sequence before making prohibited commitments.

Answer C is correct because a sufficient total does not establish that money is available when obligations must be incurred. A time-phased comparison quantifies the actual gap.

Incorrect Answers

Answer B is incorrect because later payment may improve cash timing, but this policy limits commitments above available funding. Unchanged commitments still breach the stated timing constraint even if invoices are deferred.

Answer D is incorrect because a budget allowance and released funds are different quantities. Unspent contingency does not solve the timing gap unless it is actually available and authorized for the commitments being made.

Answer E is incorrect because the policy limits total commitments to available funds, not just the size of each order. Splitting an aggregate obligation does not resolve the shortfall before the next release.

Answer F is incorrect because annual approval does not override the explicit quarterly availability restriction. The timing boundary remains binding under the stated policy.

 

Question 23

A stable product team costs $45,000 per iteration. The current forecast requires four more iterations, followed by a $20,000 release service not included in team cost. With no staffing or rate changes, what is the estimate to complete?

1. $65,000.
2. $260,000.
3. $200,000.
4. $180,000.
5. $225,000.

Correct Answer: C

 

Correct Answer

Answer C is correct because four iterations cost 4 x $45,000 = $180,000. Adding the separate $20,000 release service gives $200,000 of expected remaining cost.

Incorrect Answers

Answer A is incorrect because one iteration plus the release fee does not cover the four remaining iterations. The forecast must include the full stated duration of team funding.

Answer B is incorrect because adding the $20,000 fee to every iteration produces this amount. The scenario charges it once after the four iterations, not four times.

Answer D is incorrect because this includes the team but omits the required release service. The fee is explicitly outside the iteration cost.

Answer E is incorrect because this assumes five iterations at the team rate and leaves out the distinct service basis. The plan specifies four iterations and one separate $20,000 cost.

 

Question 24

An adaptive team’s cost per iteration is unchanged, but new delivery evidence increases the forecast from four remaining iterations to six. The budget assumed four. What should the project manager do?

1. Update the cost forecast and present scope or funding options for the extra iterations.
2. Keep the forecast unchanged because the team’s rate has not increased.
3. Increase the approved baseline automatically by two iterations of cost.
4. Keep four iterations in the funding request and classify the remaining two as unpriced schedule contingency.
5. Retain the four-iteration estimate using the team’s best historical iteration as the new productivity assumption.

Correct Answer: A

 

Correct Answer

Answer A is correct because a stable team rate does not imply a stable total when duration increases. The additional two iterations create a decision about scope, funding, or another feasible delivery change.

Incorrect Answers

Answer B is incorrect because total remaining cost depends on both rate and number of iterations. Ignoring the longer horizon understates expected expenditure.

Answer C is incorrect because the new forecast reveals a need but does not itself authorize funding. The applicable decision process must approve any budget change.

Answer D is incorrect because the updated forecast expects six iterations of the same funded team. Reclassifying two of them does not remove their cost or justify excluding them from the expected remaining expenditure.

Answer E is incorrect because a historical best is not evidence that the current six-iteration forecast can be compressed to four. Any recovery assumption needs a credible change in scope, capacity, or delivery conditions.

 

Question 25

Equipment costs $100,000 in today’s prices. Purchase is planned exactly two years from now. The approved estimating assumption is 5% annual escalation, compounded, with no other price changes. What nominal purchase allowance should be used?

1. $90,703, approximately.
2. $110,250.
3. $110,000.
4. $105,000.
5. $100,000.

Correct Answer: B

 

Correct Answer

Answer B is correct because the future-price allowance is $100,000 x 1.05 x 1.05. Compounding gives $110,250 because the second year’s increase applies to the already escalated amount.

Incorrect Answers

Answer A is incorrect because dividing by 1.05 squared discounts a future amount back to today’s value. The task instead projects a current price forward to the payment date.

Answer C is incorrect because this adds two flat five-percent increments to the original base. It uses simple escalation rather than the specified compounding.

Answer D is incorrect because this allows for only one year of escalation. The planned purchase occurs after two complete years.

Answer E is incorrect because this preserves today’s purchasing-price basis and excludes the approved future escalation assumption. It understates the nominal allowance at the purchase date.

 

Question 26

A cost analyst assembles historical project data in several currencies and price years. Some records include two years of support, while the new estimate covers implementation only. Which TWO preparation steps are required before treating the data as comparable? Choose TWO.

1. Convert costs to a consistent currency and price-year basis using documented assumptions.
2. Exclude the highest-cost records as outliers before examining their support scope and price years.
3. Apply a single average unit cost to all records before checking their contents.
4. Pool the historical totals first and rely on the larger sample to absorb currency and scope differences.
5. Convert all records at today’s exchange rate and treat that conversion as sufficient normalization.
6. Separate support costs from implementation costs where the records permit it.

Correct Answers: A, F

 

Correct Answers

Answer A is correct because nominal amounts from different dates and currencies are not directly comparable. A traceable normalization makes differences in work more distinguishable from economic conversion effects.

Answer F is correct because the intended scope boundary is implementation. Including support in only some observations would bias the relationship between the historical work and its reported cost.

Incorrect Answers

Answer B is incorrect because the high totals may be explained by legitimate scope or economic differences. Those bases need normalization before deciding whether a record is unsuitable or an outlier.

Answer C is incorrect because a common ratio may conceal the inconsistent scope and economic bases rather than normalize them. Support inclusion, currency, and price year need reconciliation before the observations can inform a valid unit model.

Answer D is incorrect because a larger sample does not cancel systematic differences in economic basis or included support. The resulting average could describe neither current implementation scope nor a consistent price year.

Answer E is incorrect because a common currency alone does not align price years or remove support included in some observations. The estimate also needs documented time-price adjustments and a consistent scope boundary.

 

Question 27

At the same cutoff, control account A has EV $80,000 and AC $100,000. Account B has EV $18,000 and AC $20,000. What is the combined CPI, rounded to three decimals?

1. 0.800.
2. 0.850.
3. 0.900.
4. 1.224.
5. 0.817.

Correct Answer: E

 

Correct Answer

Answer E is correct because combined EV is $98,000 and combined AC is $120,000. Their ratio is 0.816666…, which rounds to 0.817 and weights each account by its actual cost.

Incorrect Answers

Answer A is incorrect because this uses only account A’s CPI and ignores B’s earned value and actual cost. The combined result is slightly higher because B is more efficient.

Answer B is incorrect because this averages the separate CPIs of 0.80 and 0.90 equally. The accounts have different cost sizes, so a simple average misrepresents combined efficiency.

Answer C is incorrect because this uses only the smaller account’s CPI. Account A’s much larger actual cost must also be included in the aggregate.

Answer D is incorrect because this is approximately combined AC divided by combined EV. CPI uses the opposite ratio, so an overrun should produce a result below one.

 

Question 28

A work package contains 100 units budgeted at $1,000 each. Its earned-value rule credits only accepted units. Thirty units are accepted, ten are partly built, and actual cost is $38,000. What is cost variance under this rule?

1. Zero.
2. -$8,000.
3. $2,000.
4. $62,000.
5. -$38,000.

Correct Answer: B

 

Correct Answer

Answer B is correct because earned value is 30 x $1,000 = $30,000 because the ten partial units earn nothing under the stated rule. CV = $30,000 – $38,000 = -$8,000.

Incorrect Answers

Answer A is incorrect because setting EV equal to actual spending would make cost variance disappear by definition. Earned value follows budgeted accomplishment, not incurred cost.

Answer C is incorrect because this credits all forty started units as complete, giving EV $40,000. The measurement rule explicitly excludes partial units from earned value.

Answer D is incorrect because this subtracts actual cost from the full work-package budget. Most of that work has not yet earned value, so the result is not cost variance.

Answer E is incorrect because this assumes none of the work earns value and ignores the thirty accepted units. Their $30,000 budgeted value must be recognized.

 

Question 29

A board has approved $60,000 of additional future scope and authorized the related baseline change. Historical actuals are accurate, but the cost report still uses the old BAC. Which TWO updates are appropriate? Choose TWO.

1. Assume EAC rises by exactly $60,000 without reviewing remaining estimates.
2. Add the approved scope and time-phased budget to the baseline.
3. Increase earned value immediately by $60,000 because the scope is approved.
4. Leave the old BAC permanently and treat all new work as an overrun.
5. Reforecast remaining cost while retaining the valid historical actuals.
6. Spread the additional budget backward across completed periods to preserve the prior variance percentage.

Correct Answers: B, E

 

Correct Answers

Answer B is correct because the performance plan must represent the newly authorized work and when it will be performed. The approval provides the basis for updating BAC and its detailed allocation.

Answer E is correct because new scope changes the remaining work estimate, but it does not change costs already incurred. Keeping actuals intact preserves traceability of the full forecast.

Incorrect Answers

Answer A is incorrect because the budget authorization and forecast cost are not necessarily identical. The new work and any effects on existing work need estimating.

Answer C is incorrect because authorization creates budget, not accomplishment. The new work earns value only when it meets the applicable measurement rule.

Answer D is incorrect because the baseline change is authorized. Omitting its budget would compare delivery against an obsolete scope boundary and misclassify approved expansion.

Answer F is incorrect because the authorization covers future additional scope, not a retrospective redistribution designed to preserve reported performance. Its budget belongs with the approved work and timing while valid historical actuals remain intact.

 

Question 30

A project reports in US dollars and owes a supplier EUR 100,000. The amount is unhedged. Its old forecast used USD 1.10 per EUR, while the updated assumption is USD 1.20 per EUR. Ignoring fees, what is the change in forecast dollar cost?

1. An increase of $10,000, from $110,000 to $120,000.
2. No change because the supplier’s euro invoice is fixed.
3. An increase of EUR 10,000 in the supplier’s entitlement.
4. A decrease to about $83,333.
5. A decrease of $10,000, from $120,000 to $110,000.

Correct Answer: A

 

Correct Answer

Answer A is correct because multiplying the same EUR 100,000 obligation by the two dollar-per-euro rates gives the old and new costs. The foreign-currency amount stays fixed while its reporting-currency cost rises.

Incorrect Answers

Answer B is incorrect because a fixed foreign-currency obligation can still vary in the buyer’s reporting currency when it is unhedged. Contract amount and translated forecast are different quantities.

Answer C is incorrect because the exchange assumption changes the buyer’s dollar forecast, not the supplier’s agreed EUR 100,000 entitlement.

Answer D is incorrect because dividing euros by a dollars-per-euro rate reverses the conversion. Multiplication is required to obtain dollars from the stated units.

Answer E is incorrect because this reverses the direction of the rate change. Each euro now requires more dollars, so the dollar cost increases.

 

Question 31

A sensitivity analysis varies three uncertain inputs over equally credible ranges. Labor productivity changes total cost by 18%, license price by 3%, and travel rates by 1%. The team can investigate only one assumption before the funding decision. Which should it prioritize?

1. Travel rates because they are easiest to quote precisely.
2. Investigate all three inputs equally to avoid bias toward the largest cost driver.
3. Use the midpoint of each input range and proceed without further investigation.
4. Labor productivity.
5. License price because it is paid to an external supplier.

Correct Answer: D

 

Correct Answer

Answer D is correct because its tested range has the largest effect on the total estimate. Reducing uncertainty in that driver offers the greatest potential to improve the decision under the supplied sensitivity evidence.

Incorrect Answers

Answer A is incorrect because an easier quotation may improve a small input, but its modeled effect is only one percent. Ease alone does not match the goal of improving the most consequential uncertainty.

Answer B is incorrect because equal effort would ignore the supplied difference in decision sensitivity and the capacity to investigate only one assumption. Labor productivity has the largest modeled effect over the equally credible ranges.

Answer C is incorrect because midpoints provide point assumptions but do not resolve the uncertainty that makes funding sensitive to labor productivity. The analysis identifies where the available investigation can most improve the decision.

Answer E is incorrect because external payment does not determine sensitivity. The modeled effect is substantially smaller than labor productivity’s eighteen-percent impact.

 

Question 32

A product forecast needs six to nine additional iterations at $40,000 per iteration. The range assumes unchanged staffing and the current release scope. Which TWO statements belong in the funding discussion? Choose TWO.

1. The current remaining-cost range is $240,000 to $360,000 under those assumptions.
2. Treat $360,000 as the maximum remaining funding requirement regardless of later delivery evidence.
3. Authorize only $240,000 because the six-iteration endpoint is the current minimum feasible plan.
4. The midpoint is automatically the 90% confidence estimate.
5. Exclude the iteration team cost from the request and include only additional vendor purchases.
6. Changes in staffing cost or release scope require the forecast to be updated.

Correct Answers: A, F

 

Correct Answers

Answer A is correct because multiplying the lower and upper iteration counts by the stable rate gives the range. It communicates the financial consequence of delivery uncertainty without presenting one endpoint as certain.

Answer F is correct because both assumptions drive the estimate. If either changes, the current multiplication may no longer describe the work and resources being funded.

Incorrect Answers

Answer B is incorrect because the upper endpoint holds only under the current staffing and scope assumptions. Updated throughput or scope evidence can change the iteration range, so the forecast still requires monitoring.

Answer C is incorrect because the lower endpoint is one outcome within the forecast range, not evidence that it will cover the release. A funding decision should acknowledge the upper exposure and the assumptions needed to achieve the shorter horizon.

Answer D is incorrect because averaging endpoints does not establish a probability level. A confidence claim would require an appropriate uncertainty model and supporting data.

Answer E is incorrect because the forecast explicitly funds six to nine further iterations at $40,000 each. An existing team still consumes resources during those periods, so omitting it understates remaining cost.

 

Question 33

A project uses expected cost to compare a preventive test. Without it, there is a 30% chance of $100,000 rework. The test costs $12,000 and reduces that probability to 10%; all other costs and outcomes are equal. Which option has the lower expected cost?

1. Skip the test because its certain $12,000 cost exceeds zero certain rework cost.
2. Perform the test because it eliminates the entire $30,000 expected loss.
3. Perform the test: expected cost $22,000 versus $30,000 without it.
4. Treat the alternatives as equal because rework severity remains $100,000.
5. Skip the test because testing plus rework always costs $112,000.

Correct Answer: C

 

Correct Answer

Answer C is correct because testing costs $12,000 plus 10% x $100,000 residual expected rework, totaling $22,000. Without testing, expected rework is $30,000, so the test saves $8,000 on the stated criterion.

Incorrect Answers

Answer A is incorrect because the decision rule compares expected cost, including uncertain losses. Treating an uncertain event as zero ignores the supplied thirty-percent probability.

Answer B is incorrect because the test reduces the probability but leaves $10,000 of expected rework. Ignoring residual exposure overstates the benefit.

Answer D is incorrect because expected cost depends on probability as well as severity. Reducing probability changes expected exposure even when the conditional loss amount stays the same.

Answer E is incorrect because that is the outcome if rework occurs after testing, not the probability-weighted expected cost. The stated decision criterion requires weighting the residual event.

 

Question 34

A control account exceeds its labor budget for the same completed scope. The records separately show planned and actual hours and labor rates. Which TWO analyses most directly explain the cost difference? Choose TWO.

1. Compare actual hours with the hours budgeted for the completed work.
2. Compare labor cost only with the total project funding still available.
3. Compare actual labor rates and skill mix with the estimating assumptions.
4. Apply the account’s overall overrun percentage to every remaining labor package as the cost explanation.
5. Compare actual average rates with plan and attribute the entire difference to wage escalation.
6. Compare the account’s total expenditure with last quarter’s cash disbursements.

Correct Answers: A, C

 

Correct Answers

Answer A is correct because excess effort can indicate productivity loss, rework, or a poor quantity estimate. Matching the completed scope keeps that analysis distinct from simply performing more work.

Answer C is correct because higher rates or a different mix can raise cost even when hours match the plan. Separating this effect from effort helps identify a response that addresses the real driver.

Incorrect Answers

Answer B is incorrect because remaining funding indicates affordability, not the cause of the account overrun. The same completed work can exceed its labor estimate even when the wider project has funds available.

Answer D is incorrect because that may create a rough forecast adjustment, but it does not explain whether the observed difference arose from hours, rates, or skill mix. The recorded drivers should be separated before generalizing the experience.

Answer E is incorrect because average rates can change with skill mix, and total labor cost can also change through hours used. A rate-only attribution would leave the available effort evidence unexplained.

Answer F is incorrect because that comparison may explain cash timing but does not isolate why the same completed scope required different labor cost. Hours, rates, and mix provide the direct quantity and price drivers.

 

Question 35

A sponsor must decide whether to provide additional funding. Actual costs are complete, the latest EAC exceeds the unchanged approved budget, and reserves have been consumed faster than expected. Which THREE elements should the project manager present together? Choose THREE.

1. Report operating expenditure separately and exclude reserve-funded responses from the total cost comparison.
2. Remaining reserve and the risks it is expected to cover.
3. The revised EAC with its remaining-work assumptions and decision options.
4. Use the best-case remaining-cost scenario as the funding request and place the current EAC only in backup notes.
5. Present a proposed baseline equal to EAC as the main performance comparison, pending later approval.
6. Reconciled actual cost and the current approved baseline comparison.

Correct Answers: B, C, F

 

Correct Answers

Answer B is correct because rapid consumption changes the project’s ability to absorb future uncertainty. The sponsor needs the residual exposure alongside the central forecast to judge funding adequacy.

Answer C is correct because additional funding should be based on the expected cost to finish and the conditions driving it. Alternatives make the implication of the forecast actionable without pretending it is already authorized.

Answer F is correct because the sponsor needs a reliable account of cost incurred and the authorization against which performance is assessed. Keeping that comparison visible avoids confusing a forecast increase with an approved budget change.

Incorrect Answers

Answer A is incorrect because separate categories can aid analysis, but reserve-funded responses remain part of incurred project cost. Excluding them from the total would break reconciliation and understate the funding already consumed.

Answer D is incorrect because the sponsor needs the credible current completion forecast and its assumptions to decide. A best-case option may be shown, but substituting it for the current EAC conceals the central funding need and reserve exposure.

Answer E is incorrect because a proposed authorization is a decision option, not the current performance baseline. Using it as the main comparison would obscure the overrun against the unchanged approved budget that the sponsor needs to see.