185 PMP Mock Exam on Project Cost Management from Chapter 7 of PMBOK 5th Edition

When taking an examination that you need to prepare well your knowledge for your exam, thus firstly you should learn the concept and information included in your material. Indeed, there are 200 questions in your real exam that you need to score 106 out of 200 questions during 4 hours. Here we introduce your exam preparation 185 PMP Mock Exam on Project Cost Management that you can cover the key of this area. Moreover, these 185 quiz questions below which taken from chapter 7 of PMBOK 5ht Edition, a new revision for your examination. To ensure that you will overcome your real test, we will provide this study tool to help you practice easier with those knowledge area and obtain the PMP certification at this time. Especially, it is the best way to learn the concepts that it is useful for your examination and the type of questions which is similar questions included your real. Take 185 multiple choice questions below to discover all background of project cost management and get best result at this time by practicing free PMP mock exam everyday at our site. For sure that you will be surprised with your practical exam prep each. Let’s start right now!

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185 PMP Mock Exam on Project Cost Management from Chapter 7 of PMBOK 5th Edition -Page 1

a manual, bottom-up summation by the project manager and project team

Bottum Up EAC Method
Cost Performance Index
Most common EAC forecasting approach
Cost Management Plan

Process Descriptions

Budgets reserved for unplanned changes to project scope and cost
Descriptions of each of the three cost management processes are documented.
Indicates a cost overrun for work completed.
Monitoring and Controlling Process Group

Crashing of a project results in

decreased duration and increased costs. This is reflected with CPI is less than 1 and SPI is greater than 1
Those costs that can be directly traced to a specific project
The formats and frequency for the various cost reports are defined.
Indicates less work was completed than was planned.

Cost Performance Index

The relationship of physical performance to the costs spent.
Is a measure of progress achieved compared to progress planned on a project. It is sometimes used in conjunction with the cost performance index (CPI) to forecast the final project completion estimates. The SPI is equal to the ratio of the EV to the PV.
Budgets reserved for unplanned changes to project scope and cost
Is a measure of the value of work completed compared to the actual cost or progress made on the project. It is considered the most critical EVM metric and measures the cost efficiency for the work completed. The CPI is equal to the ratio of the EV to the AC

• If the cumulative CPI falls below the baseline plan, all future work of the project will need to immediately be performed in the range of the TCPI (BAC) to stay within the authorized BAC.• Whether this level of performance is achievable is a judgment call based on a number of considerations, including risks, schedule, and technical performance.• Once management acknowledges that the BAC is no longer attainable, the project manager will prepare a new estimate at completion (EAC) for the work, and once approved, the project will work to the new EAC value.• This level of performance is displayed as the TCPI (EAC)

Scope baseline
TCPI Based on EAC
CPI > 1
CPI < 1

The project schedule, as part of the project management plan, includes planned start and finish dates for the project's activities, milestones, work packages, planning packages, and control accounts. This information can be used to aggregate costs to the calendar periods in which the costs are planned to be incurred.

Forecasting
Project Schedule
Project management plan
Process Descriptions

SV best used in conjunction with

critical path methodology (CPM) scheduling and risk management
Cost Performance Index
the performance measurement baseline (PMB)
The total of Planned Value

EAC forecast for ETC work performed at the budgeted rate

• method builds upon the actual costs and experience incurred for the work completed, and requires a new estimate to complete the remaining project work.• This method may be problematic in that it interferes with the conduct of project work.• The personnel who are performing the project work have to stop working to provide a detailed bottom-up ETC of the remaining work.• Typically there is no separate budget to perform the ETC, so additional costs are incurred for the project to conduct the ETC• The project manager's manual EAC can be quickly compared with a range of calculated EACs representing various risk scenarios.
The relationship of physical performance to the costs spent.
• This EAC method accepts the actual project performance to date (whether favorable or unfavorable) as represented by the actual costs, and predicts that all future ETC work will be accomplished at the budgeted rate.• When actual performance is unfavorable, the assumption that future performance will improve should be accepted only when supported by project risk analysis.
Describes how the project costs will be managed and controlled.

Project Cost Management

- The process of developing an approximation of the monetary resources needed to complete project activities.- The key benefit of this process is that it determines the amount of cost required to complete project work.
Reflect the cost and schedule performance of any project for comparison against all other projects or within a portfolio of projects. The variances and indices are useful for determining project status and providing a basis for estimating project cost and schedule outcome
Describes how the project costs will be managed and controlled.
Includes the processes involved in estimating, budgeting, and controlling costs so that the project can be completed within the approved budget

The calculated CV, SV, CPI, and SPI values for WBS components, in particular the work packages and control accounts, are documented and communicated to stakeholders.

Schedule Performance Index
Work Performance Information
Other information.
Three-Point Estimates

EAC forecast for ETC work considering both SPI and CPI factors: Equation

EAC = AC + BAC - EV
AC + [(BAC - EV) / (cumulative CPIx cumulative SPI)] orEAC = AC + [(BAC - EV) / (CPI × SPI)]
EAC = BAC / cumulative CPI orEAC = BAC / CPI
• Planned value• Earned value• Actual cost

Variances monitored as part of Control Costs

• The risk register
• Schedule variance• Cost variance
Performance Measurement Baseline
• Schedule Performance Index• Cost Performance Index

Depending on the assumed distribution of values within the range of the three estimates the expected cost, cE,can be calculated using a formula.Two commonly used formulas are triangular and beta distributions. The formulas are:

• Triangular Distribution. cE = (cO + cM + cP) / 3• Beta Distribution (from a traditional PERT analysis). cE = (cO + 4cM + cP) / 6
• Planned value• Earned value• Actual cost
• Is a method of estimating a component of work• The cost of individual work packages or activities is estimated with the greatest level of specified detail. • The detailed cost is then summarized or "rolled up" to higher levels for subsequent reporting and tracking purposes. • The cost and accuracy of bottom-up cost estimating is typically influenced by the size and complexity of the individual activity or work package.
Additional details about cost management activities:○ Description of strategic funding choices,○ Procedure to account for fluctuations in currency exchange rates, and○ Procedure for project cost recording.

The ability to influence cost is greatest at the early stages of the project, making early scope definition critical • Should consider the stakeholder requirements for capturing costs. Different stakeholders will measure project costs in different ways and at different times. • Is primarily concerned with the cost of the resources needed to complete project activities. • Should also consider the effect of project decisions on the subsequent recurring cost of using, maintaining, and supporting the product, service, or result of the project. For example, limiting the number of design reviews can reduce the cost of the project but could do so by increasing the customer's operating costs.• The cost management planning effort occurs early in project planning and sets the framework for each of the cost management processes so that performance of the processes will be efficient and coordinated.

Characteristics of Actual Cost
Characteristics of Project Cost Management
Characteristics of Control Costs
Output (1) of Plan Cost Management

Variance Analysis

• Cost estimates• Basis of estimates
Assumptions about costs of quality may be used to prepare the activity cost estimate
• Cost performance measurements (CV, CPI) are used to assess the magnitude of variation to the original cost baseline.• Important aspects of project cost control include determining the cause and degree of variance relative to the cost performance baseline and deciding whether corrective or preventive action is required.•The percentage range of acceptable variances will tend to decrease as more work is accomplished.• The larger percentage variances allowed at the start of the project can decrease as the project nears completion-
• In this forecast, the ETC work will be performed at an efficiency rate that considers both the cost and schedule performance indices.• It assumes both a negative cost performance to date, and a requirement to meet a firm schedule commitment by the project.• This method is most useful when the project schedule is a factor impacting the ETC effort.• Variations of this method weigh the CPI and SPI at different values (e.g., 80/20, 50/50, or some other ratio) according to the project manager's judgment.

Project Management Plan Updates

• Cost performance baseline.• Cost management plan
• Schedule Performance Index• Cost Performance Index
Indicates a cost overrun for work completed.
• Schedule variance• Cost variance

Tools &Techniques (5) of Determine Budget

1 Cost aggregation2 Reserve analysis3 Expert judgment4 Historical relationships5 Funding limit reconciliation
• Variance analysis• Trend analysis• Earned value performance
1 Cost management plan2 Human resource management plan3 Scope baseline4 Project schedule5 Risk register6 Enterprise environmental factors7 Organizational process assets
1. Plan Cost Management2. Estimate Costs3. Determine Budget4. Control Costs

Work Breakdown Structure

- The process of monitoring the status of the project to update the project budget and managing changes to the cost baseline.- The key benefit of this process is that it provides the means to recognize variance from the plan in order to take corrective action and minimize risk.
The relationship of physical performance to the costs spent.
The schedule baseline defines when the project costs will be incurred.
Provides the relationships among all the components of the project and the project deliverables

Indicates less work was completed than was planned.

SPI < 1
BAC
SPI
SV

Cost management plan

Changes to the cost management plan, such as changes to control thresholds or specified levels of accuracy required in managing the project's cost, are incorporated in response to feedback from relevant stakeholders.
• Cost performance measurements (CV, CPI) are used to assess the magnitude of variation to the original cost baseline.• Important aspects of project cost control include determining the cause and degree of variance relative to the cost performance baseline and deciding whether corrective or preventive action is required.•The percentage range of acceptable variances will tend to decrease as more work is accomplished.• The larger percentage variances allowed at the start of the project can decrease as the project nears completion-
Those costs that can be directly traced to a specific project
The formats and frequency for the various cost reports are defined.

Factors can be influence:• Financial controls procedures (e.g., time reporting, required expenditure and disbursement reviews, accounting codes, and standard contract provisions);• Historical information and lessons learned knowledge bases;• Financial databases;• Existing formal and informal cost estimating and budgeting-related policies, procedures, and guidelines.

Organizational Process Assets
Management Reserves
Process: Control Costs
Organizational Process Assets Updates

Scope Statement

Formal limitations by period for the expenditure of project funds can be mandated by the organization, by contract or by other entities such as government agencies. These funding constraints are reflected in the project scope statement.
Include projected expenditures plus anticipatedliabilities.
• Cost performance baseline.• Cost management plan
a manual, bottom-up summation by the project manager and project team

• Planned value• Earned value• Actual cost

Three-Point Estimates
Negative CV is often
Three Key Dimensions of EVM
Risk register

Describe what products, services, and results are available in the market, from whom, and under what terms and conditions. Regional and/or global supply and demand conditions greatly influence resource costs

Process: Estimate Costs
Input (7) of Estimate Costs
Market Conditions Impact on Estimate Costs
Basis of Estimates

Work performance data includes information about project progress, such as which deliverables have started, their progress and which deliverables have finished. Information also includes costs that have been authorized and incurred, and estimates for completing project work.

Work performance data
Cost Variance indicates
Cost Performance Index
Schedule Performance Index

- Defines how project costs will be managed andcontrolled. - It includes the method used and the level of accuracy required to estimate activity cost.

Cost Management Plan
Scope Statement
Project Management Software
Project Management Plan Updates

The project WBS provides the relationships among all the project deliverables and their various components.

Risk Register
Work breakdown structure
Cost management plan
Basis of Estimates

Process: Control Costs

Activity duration estimates will affect cost estimates on any project where the project budget includes an allowance for the cost of financing (including interest charges) and where resources are applied per unit of time for the duration of the activity. Activity duration estimates can also affect cost estimates that have time-sensitive costs included in them
- The process of monitoring the status of the project to update the project budget and managing changes to the cost baseline.- The key benefit of this process is that it provides the means to recognize variance from the plan in order to take corrective action and minimize risk.
Constitute the funds authorized to execute the project.
The cost baseline is the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures and is used as a basis for comparison to actual results. It is developed as a summation of the approved budgets for the different schedule activities.

EAC = AC + BAC - EV

EAC forecast for ETC work performed at the present CPI
Work performance data
EAC forecast for ETC work performed at the budgeted rate: Equation
TCPI Based on BAC: Equation

To-complete performance index (TCPI)

Earned value management (EVM) rules of performance measurement are set. Examples the cost management plan could:• Define the WBS and points at which measurement of control accounts will be performed,• Establish the earned value measurement techniques (e.g., weighted milestones, fixed formula, percent complete, etc.) to be employed• Specify the earned value management computation equations for determining the project estimate at completion (EAC) forecasts and other tracking methodologies
• Analysis of project performance can result in a change request to the cost performance baseline or other components of the project management plan.• Change requests can include preventive or corrective actions and are processed for review and disposition through the Perform Integrated Change Control process
Is the calculated projection of cost performance that must be achieved on the remaining work to meet a specified management goal, such as the BAC or the EAC
Is the management of the approved cost performance baseline and the changes to that baseline.

Schedule Variance

Risk Register
SV
EVM
Actual Cost

Organizational Process Assets

1 Cost baseline2 Project funding requirements3 Project documents updates
Factors can be influence:• Cost estimating policies• Cost estimating templates• Historical information• Lessons learned
1. Activity Cost Estimates2. Basis of Estimates3. Project Document Updates
• Risk register,• Cost estimates,• Project schedule

Cost Baseline

Indicates less work was completed than was planned.
Includes all authorized budgets, but excludes management reserves.
Zero, because all planned values will have been earned
Describes how the project costs will be managed and controlled.

Units of Measure

Each unit used in measurements (such as staff hours, staff days, weeks, or lump sum) is defined for each of the resources
The schedule baseline defines when the project costs will be incurred.
- Team-based approaches, such as brainstorming, the Delphi or nominal group techniques, are useful for engagingteam members to improve estimate accuracy and commitment to the emerging estimates.- Involving a structured group of people who are close to the technical execution of work in the estimation process, additional information isgained and more accurate estimates are obtained.- People involve in the estimation process,their commitment towards meeting the resulting estimates increases.
• Cost performance measurements (CV, CPI) are used to assess the magnitude of variation to the original cost baseline.• Important aspects of project cost control include determining the cause and degree of variance relative to the cost performance baseline and deciding whether corrective or preventive action is required.•The percentage range of acceptable variances will tend to decrease as more work is accomplished.• The larger percentage variances allowed at the start of the project can decrease as the project nears completion-

Project Cost Management Processes (4)

1. Plan Cost Management2. Estimate Costs3. Determine Budget4. Control Costs
- Quantitative assessments of the probable costs required to complete project work. Cost estimates can be presented in summary form or in detail. Costs are estimated for all resources thatare applied to the activity cost estimate.
1 Expert judgment2 Analogous estimating3 Parametric estimating4 Bottom-up estimating5 Three-point estimating6 Reserve analysis7 Cost of quality8 Project management software9 Vendor bid analysis10 Group decision-making techniques
- The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.- The key benefit of this process is that it determines the cost baseline againstwhich project performance can be monitored and controlled.

Indicates a cost under run of performance to date.

SPI
Forecasting
CPI
CPI > 1

Output (1) of Plan Cost Management

Those costs that can be directly traced to a specific project
Budget At Completion
EAC = BAC / cumulative CPI orEAC = BAC / CPI
1 Cost management plan

As used in EVM compares actual project performance to planned or expected performance. Cost and schedule variances are the most frequently analyzed

Performance Review: Variance Analysis
EV monitored incrementally to
Reserve Analysis
Work performance data

Either a calculated EAC value or a bottom-up EAC value is documented and communicated to stakeholders.

Cost forecasts
Cost Variance
Forecasting
Cost baseline

Schedule Performance Index

CPI > 1
PMB
SPI
CPI

185 PMP Mock Exam on Project Cost Management from Chapter 7 of PMBOK 5th Edition