# PMP 04. Project Cost Management

- A CPI value of 1.20 and an SPI value of 1.30 for a project mean which of the following ?

CPI value is greater than 1 means the cost performance of the project is better than planned, and an SPI value of greater than 1 means the schedule performance of the project is better than planned.

2. A Cost Performance Index (CPI) of 0.89 means :

The CPI is less than one, so the situation is bad. The project is only getting 89 cents out of every dollar invested.

3. You are in the project manager of a construction project that will take six months to complete and will cost $75,000 / month. At the end of third month, you are asked to find out the cumulative SPI for the project. While reviewing, you found that you have spent $80,000 in the first month, $72,000 in the second month, and $75,000 in the third month. And also found that project was 15% complete at the end of 1st month, 35 % complete at the end of 2nd month, 45 % complete at the end of 3rd month. If you planned to complete 50% of the work by this time, what is the cumulative SPI at the end of month three ?

We have BAC = 6*$75,000 = $450,000

at the end of month three, we were supposed to finish 50% of the work, PV= BAC * Planned % Complete or PV = $450,000 * 50% = $225,000

Project work is 45% completed at the end of three months, EV=BAC * Actual % complete or EV = $450,000 * 45% = $202,500

SPI = EV / PV or SPI = $202,000 / $225,000 = 0.9

4. One common way to compute estimate at completion (EAC) is to take the budget at completion (BAC) and :

This question is asking for the formula for EAC, which is BAC/CPIC.

5. If earned value (EV) = 350, actual cost (AC) = 400, planned value (PV) = 325, what is cost variance (CV) ?

The formula is CV = EV - AC = 350 - 400 = -50

6. At your project, EV = $130,500 ; PV = $125,000 ; and AC = $129,000. Which one the following statement is true ?

The EV is greater than PV, which indicates the project is ahead of schedule. The AC is smaller than the EV, which indicates the project is under budget.

7. Your recently took over a project another project manager who left the organization. You find out that the project has a BAC = $45,000; PV = $30,000; cumulative = $25,000 ; cumulative EV = $24,000. You decided to perform a forecasting analysis and calculated the values for EAC, ETC, and VAC. Which of the following is NOT true ?

EAC=BAC/CPI ; ETC=EAC-AC ; VAC=BAC-EAC ; and CPI=EV/AC

CPI=$24,000/$25,000=0.96 ; EAC=$45,000/0.96=$46,875 ; ETC=$46,875-$25,000=$21,875 ; VAC=$45,000-$46,875= -$1,875

All of the statements are true except D, the project is over budget by $1,875, not under budget

8. You asked one of your team member about the schedule variance (SV) for one of the key deliverables. He mentioned that he is behind the schedule but there would not be a cost variance. Which of the following is NOT true in this case ?

SV = EV - PV, since SV has a negative value EV must be less than PV

Also CV=EV-AC, since there will be no cost variance, EV and AC have the same value, CPI is also EV/AC= 1

9. Which one of the following is FALSE about TCPI ?

10. A project manager involved in the Estimate Costs process in the early phase when a limited amount of detail was available. The range was $75,000 to $200,000, and actual cost come to be around $150,000. What would you call such an estimate ?

A rough order to magnitude (-25% to 75%) is an approximate estimate made without detailed data. This type of estimate is used during the formative stages for initial evaluation of a project's feasibility. In this example, $75,000 and $200,000 are -25% to +75% of $150,000