Project Cost Management Principles Quiz With Questions And Answers!

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  • 1/38 Questions

    What is the total of direct and indirect costs incurred in accomplishing work on an activity during a given period known as?

    • Earned value (EV)
    • Actual Cost (AC)
    • Schedule Variance (SV)
    • Budget at Completion (BAC)
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About This Quiz


Take this project cost management principles quiz today in order to test your knowledge and find out how well you know these basic concepts and theories. This test is designed in a manner so as to offer a wide range of questions with respect to the subject at hand as a whole. It will not only test your knowledge, but See morealso the ability to retain and recall that knowledge during a test or an examination. Don't forget to share this quiz with your friends, now go ahead and ace it!

Project Cost Management Principles Quiz With Questions And Answers! - Quiz

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  • 2. 

    The original project plan plus approved changes is called ______________.

    • Cost Management Plan

    • Cost Baseline

    • Baseline

    • Cost Control

    Correct Answer
    A. Baseline
    Explanation
    The original project plan plus approved changes is called a baseline. This is a reference point that helps measure and track the progress of a project. It includes the initial plan as well as any approved modifications or adjustments made throughout the project. The baseline serves as a benchmark against which actual performance can be compared, allowing for effective cost control and management.

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  • 3. 

    __________________  is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity.

    • Learning Curve Theory

    • Parametric Modeling

    • Rate of Performance (RP)

    • Schedule Variance (SV)

    Correct Answer
    A. Rate of Performance (RP)
    Explanation
    Rate of Performance (RP) is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity. This means that RP measures the efficiency of completing work in comparison to the planned schedule. A higher RP indicates that the work is being completed at a faster rate than planned, while a lower RP suggests that the work is being completed at a slower rate. RP is an important metric for project management as it helps to identify if the project is on track or if adjustments need to be made to meet the planned schedule.

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  • 4. 

    __________________ is the ratio of earned value to planned value; can be used to estimate the projected time to complete a project.

    • Indirect Costs

    • Life Cycle Costing

    • Schedule Variance (SV)

    • Schedule Performance Index (SPI)

    Correct Answer
    A. Schedule Performance Index (SPI)
    Explanation
    The Schedule Performance Index (SPI) is the ratio of earned value to planned value. It measures the efficiency of the project in terms of schedule. By comparing the actual progress (earned value) to the planned progress (planned value), the SPI provides insight into how well the project is adhering to its schedule. A SPI value greater than 1 indicates that the project is ahead of schedule, while a value less than 1 suggests that the project is behind schedule. Therefore, the SPI can be used to estimate the projected time to complete a project.

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  • 5. 

    What is the cost estimate that provides an accurate estimate of project costs called?

    • Baseline

    • Direct Costs

    • Definitive Estimate

    • Contigency Reserves

    Correct Answer
    A. Definitive Estimate
    Explanation
    A definitive estimate refers to a cost estimate that provides an accurate and precise estimation of project costs. It is typically based on detailed and thorough analysis of project requirements, scope, and resources. This type of estimate is considered more reliable and trustworthy compared to other types of estimates. It helps in making informed decisions regarding budgeting, resource allocation, and project planning.

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  • 6. 

    What is the term for a time-phased budget that project managers use to measure and monitor cost performance?

    • Cost Baseline

    • Cost Budgeting

    • Cost Estimating

    • Cost Variance

    Correct Answer
    A. Cost Baseline
    Explanation
    A cost baseline is a time-phased budget that project managers use to measure and monitor cost performance. It serves as a reference point against which actual costs can be compared, allowing project managers to track and analyze any variances between planned and actual costs. By using a cost baseline, project managers can ensure that the project stays within budget and take necessary actions to address any cost overruns or deviations from the planned budget.

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  • 7. 

    What is the cost estimating technique based on estimating individual work items and summing them to get a project total called?

    • Analogous Estimates

    • Bottom-Up Estimates

    • Definitive Estimate

    • Parametric Estimate

    Correct Answer
    A. Bottom-Up Estimates
    Explanation
    Bottom-Up Estimates is a cost estimating technique that involves estimating the cost of individual work items and then summing them up to get a project total. This technique is considered to be more accurate and reliable as it takes into account the specific details and requirements of each work item. It requires a detailed breakdown of the project scope and involves estimating the cost of each component separately. By summing up these individual estimates, a more accurate and comprehensive project total cost can be determined.

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  • 8. 

    What is the earned value minus the actual cost known as?

    • Cost Control

    • Actual Cost

    • Cost Variance

    • Earned Value

    Correct Answer
    A. Cost Variance
    Explanation
    Cost variance is the earned value minus the actual cost. It is a measure of the cost performance on a project. A positive cost variance indicates that the project is under budget, while a negative cost variance indicates that the project is over budget. By calculating the cost variance, project managers can assess the financial health of the project and take necessary actions to control costs and ensure project success.

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  • 9. 

    What is the term for the ratio between revenues and profits?

    • Profit Margin

    • Planned Value

    • Profits

    • Actual Costs

    Correct Answer
    A. Profit Margin
    Explanation
    Profit margin is the term used to describe the ratio between revenues and profits. It is a measure of how efficiently a company generates profit from its revenue. A higher profit margin indicates that a company is able to generate more profit from its sales, while a lower profit margin suggests lower profitability. Profit margin is an important financial metric that helps investors and analysts assess the profitability and financial health of a company.

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  • 10. 

    Costs that are not directly related to the products or services of the project, but are indirectly related to the project's performance are known as___________.

    • Intangible Costs

    • Sunk Cost

    • Tangible Costs

    • Indirect Costs

    Correct Answer
    A. Indirect Costs
    Explanation
    Indirect costs refer to expenses that are not directly associated with the production or provision of a project's products or services, but still impact the project's performance. These costs are typically incurred in support of the project, such as administrative expenses, overhead costs, or general project management costs. Indirect costs are important to consider as they can significantly affect the overall financial performance of a project and should be taken into account when calculating the total cost of a project.

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  • 11. 

    A cost-estimating technique that uses project characteristics (parameters) in a mathematical model to estimate project costs is known as ____________________.

    • Learning Curve Theory

    • Life Cycle Costing

    • Parametric Modeling

    • Planned Value

    Correct Answer
    A. Parametric Modeling
    Explanation
    Parametric modeling is a cost-estimating technique that uses project characteristics in a mathematical model to estimate project costs. It involves identifying the parameters that influence the cost of a project and creating a mathematical equation or model that relates these parameters to the project cost. By inputting the values of these parameters into the model, project managers can estimate the cost of the project. This technique is useful when historical data is available and can provide more accurate cost estimates compared to other techniques.

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  • 12. 

    Money that has been spent in the past is known as ___________.

    • Actual Cost

    • Direct Cost

    • Sunk Cost

    • Indirect Cost

    Correct Answer
    A. Sunk Cost
    Explanation
    Sunk cost refers to money that has already been spent and cannot be recovered. It is a cost that has been incurred in the past and is not relevant to future decision-making. Sunk costs should not be considered when making decisions about future investments or expenditures, as they are already irretrievable. Therefore, the correct answer is "Sunk Cost."

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  • 13. 

    _________________ are the dollars included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict.

    • Management Reserves

    • Reserves

    • Project Cost Management

    • Cash Flow Analysis

    Correct Answer
    A. Reserves
    Explanation
    Reserves are the dollars included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict. These reserves act as a buffer to cover any unforeseen expenses or changes in the project scope. They provide a cushion for uncertainties and ensure that the project can be completed within the allocated budget. Reserves are an essential component of project cost management and are used to manage and control project costs effectively.

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  • 14. 

    _____________________ is a document that describes how cost variances will be managed on the project.

    • Analogous Estimate

    • Cost Management Plan

    • Earned Value Managment

    • Estimate at Completion

    Correct Answer
    A. Cost Management Plan
    Explanation
    The Cost Management Plan is a document that outlines how cost variances will be managed on a project. It provides guidance on how costs will be estimated, budgeted, and controlled throughout the project lifecycle. The plan includes information on cost baselines, cost control thresholds, and the roles and responsibilities of the project team members involved in managing costs. It serves as a reference for the project team to ensure that cost management activities are carried out effectively and efficiently, helping to keep the project within budget and on track.

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  • 15. 

    _____________________ is an estimate of what it will cost to complete the project based on performance to date.

    • Definitive Estimate

    • Cost Estimating

    • Analogous Estimate

    • Estimate at Completion

    Correct Answer
    A. Estimate at Completion
    Explanation
    Estimate at Completion is an estimate of what it will cost to complete the project based on performance to date. This means that it takes into account the progress and expenses incurred so far in order to predict the total cost of the project. It helps in assessing the financial status of the project and allows for adjustments to be made if necessary.

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  • 16. 

    What is the term for dollars included in a cost estimate to allow for future situations that may be partially planned for (sometimes called 'known unknowns') and are included in the project cost baseline?

    • Contingency Reserves

    • Cost Budgeting

    • Definitive Estimate

    • Estimate at Completion

    Correct Answer
    A. Contingency Reserves
    Explanation
    Contingency reserves refer to the dollars included in a cost estimate to account for future situations that may be partially planned for, also known as 'known unknowns'. These reserves are included in the project cost baseline to ensure that there is a buffer for unforeseen circumstances or changes in the project scope. Contingency reserves help to mitigate risks and uncertainties, providing a cushion for any additional costs that may arise during the project execution.

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  • 17. 

    What is the name given to an estimate of the value of the physical work actually completed?

    • Earned Value

    • Earned Value Management

    • Direct Costs

    • Actual Cost

    Correct Answer
    A. Earned Value
    Explanation
    Earned Value is the name given to an estimate of the value of the physical work actually completed. It is a project management technique that measures the progress of a project by comparing the budgeted cost of work performed to the actual cost of work performed. This helps in determining if a project is on track, behind schedule, or over budget. Earned Value provides a quantitative measure of the work completed, allowing project managers to assess the project's performance and make informed decisions for future planning and resource allocation.

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  • 18. 

    What are the processes required to ensure that the project is completed within the approved budget known as?

    • Management Reserves

    • Project Cost Management

    • Rate of Performance

    • Planned Value

    Correct Answer
    A. Project Cost Management
    Explanation
    Project Cost Management refers to the processes and activities that are required to ensure that the project is completed within the approved budget. It involves estimating the costs, creating a budget, monitoring and controlling the costs throughout the project, and making necessary adjustments to stay within the budget. This includes activities such as cost estimation, cost budgeting, cost control, and cost forecasting. By effectively managing the project costs, the project team can ensure that the project is completed within the approved budget and avoid any cost overruns.

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  • 19. 

    What is the theory that states that when many item are produced repetitively, the unit cost of those items normally decreases in a regular pattern as more units are produced?

    • Rough Order of Magnitude

    • Learning Curve Theory

    • Life Cycle Costing

    • Planned Value

    Correct Answer
    A. Learning Curve Theory
    Explanation
    The Learning Curve Theory states that when many items are produced repetitively, the unit cost of those items normally decreases in a regular pattern as more units are produced. This theory suggests that with each doubling of production, the unit cost decreases by a constant percentage. This decrease in cost occurs due to factors such as increased efficiency, improved processes, and the learning gained from producing more units. Therefore, the Learning Curve Theory explains the phenomenon of decreasing unit costs with increased production.

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  • 20. 

    What is the term for the cost estimating technique that uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project, also called top-down estimates?

    • Estimate at Completion

    • Definitive Estimate

    • Cost Estimating

    • Analogous Estimate

    Correct Answer
    A. Analogous Estimate
    Explanation
    Analogous estimating is a cost estimating technique that uses the actual cost of a previous, similar project as a basis for estimating the cost of the current project. It is also known as top-down estimation because it involves using high-level information from a previous project to estimate the cost of the current project. This technique is useful when there is limited information available for the current project and can provide a quick and rough estimate.

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  • 21. 

    What is the term for the original total budget for a project?

    • Estimate at Completion

    • Budget at Completion

    • Cost Performatnce Index

    • Schedule Performance Index

    Correct Answer
    A. Budget at Completion
    Explanation
    Budget at Completion refers to the original total budget for a project. It represents the estimated cost of completing all the planned work in a project. This budget includes all the costs associated with labor, materials, equipment, and any other resources required to complete the project. The Budget at Completion is an essential metric used in project management to track and control costs throughout the project's lifecycle. It helps project managers compare the actual costs incurred with the planned budget and make necessary adjustments to ensure the project stays on track financially.

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  • 22. 

    What is the method for determining the estimated annual costs and benefits for a project known as?

    • Budgetary Estimate

    • Cost Control

    • Cash Flow Analysis

    • Cost Budget

    Correct Answer
    A. Cash Flow Analysis
    Explanation
    Cash Flow Analysis is the method used to determine the estimated annual costs and benefits for a project. It involves analyzing the inflows and outflows of cash over a specific period of time, taking into account factors such as revenue, expenses, investments, and financing. By examining the timing and magnitude of cash flows, this analysis helps in evaluating the profitability and financial viability of a project. It provides insights into the project's ability to generate positive cash flow and meet its financial obligations, making it a crucial tool for effective project management and decision-making.

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  • 23. 

    A cost estimate used to allocate money into an organization's budget is known as _________________.

    • Cost Budgeting

    • Budgetary Estimate

    • Cost Management Plan

    • Definitive Estimate

    Correct Answer
    A. Budgetary Estimate
    Explanation
    A cost estimate used to allocate money into an organization's budget is known as a budgetary estimate. This estimate helps in determining the financial resources required for various activities or projects within the organization. It provides a rough approximation of the costs involved and helps in the budgeting process by allocating funds accordingly.

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  • 24. 

    What is a project performance measurement technique that integrates scope, time, and cost data called?

    • Earned Value

    • Cost Variance

    • Earned Value Management

    • Cost Baseline

    Correct Answer
    A. Earned Value Management
    Explanation
    Earned Value Management is a project performance measurement technique that integrates scope, time, and cost data. It helps in evaluating the project's progress and performance by comparing the actual work completed with the planned work and the associated costs. This technique provides a comprehensive view of the project's health and allows project managers to make informed decisions regarding schedule and budget adjustments.

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  • 25. 

    What is allocating the overall cost estimate to individual work items to establish a baseline for measuring performance called?

    • Contigency Reserves

    • Cost Baseline

    • Cost Budgeting

    • Cost Control

    Correct Answer
    A. Cost Budgeting
    Explanation
    Cost budgeting is the process of allocating the overall cost estimate to individual work items to establish a baseline for measuring performance. It involves determining and documenting the costs necessary to complete the project activities. This baseline serves as a reference point for comparing the actual costs incurred during the project execution. Cost budgeting helps in tracking and controlling project costs, ensuring that they are within the approved budget. It also enables project managers to make informed decisions regarding resource allocation and cost management throughout the project lifecycle.

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  • 26. 

    What are the costs or benefits that are difficult to measure in monetary terms?

    • Indirect Costs

    • Intangible Costs

    • Actual Costs

    • Sunk Costs

    Correct Answer
    A. Intangible Costs
    Explanation
    Intangible costs are the costs or benefits that are difficult to measure in monetary terms. Unlike actual costs, which can be easily quantified, intangible costs are more subjective and cannot be easily assigned a specific dollar value. These costs include factors such as loss of customer trust, damage to reputation, or decreased employee morale. While these costs can have a significant impact on a business, they are often difficult to measure and quantify accurately.

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  • 27. 

    What is revenues minus expenses?

    • Profit Margin

    • Profit

    • Reserves

    • Indirect Costs

    Correct Answer
    A. Profit
    Explanation
    Profit is the correct answer because it is the financial gain that is achieved when revenues exceed expenses. It represents the amount of money a company has left after deducting all costs and expenses from its total revenue. Profit is an important measure of a company's financial performance and indicates its ability to generate income and sustain growth.

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  • 28. 

    What is the term for ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity?

    • Learning Curve Theory

    • Rate of Performance

    • Management Reserves

    • Rough Order of Magnitude

    Correct Answer
    A. Rate of Performance
    Explanation
    The term for the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity is called the rate of performance. This metric helps in measuring the efficiency and progress of a project by comparing the actual work completed with the planned work. It provides insights into whether the project is on track, ahead, or behind schedule, allowing project managers to make necessary adjustments and allocate resources accordingly.

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  • 29. 

    What are the costs or benefits that can be easily measured in dollars called?

    • Tangible Costs

    • Schedule Variance

    • Management Reserves

    • Indirect Costs

    Correct Answer
    A. Tangible Costs
    Explanation
    Tangible costs refer to the costs or benefits that can be easily measured in dollars. These costs are directly observable and quantifiable, making them easier to track and assess. Examples of tangible costs include expenses for materials, labor, equipment, and other resources that can be assigned a specific monetary value. By measuring tangible costs, organizations can evaluate the financial impact of their decisions and investments, aiding in budgeting, cost control, and decision-making processes.

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  • 30. 

    What is the earned value minus the planned value?

    • Schedule Variance

    • Schedule Performance Index

    • Project Cost Managment

    • Management Reserves

    Correct Answer
    A. Schedule Variance
    Explanation
    Schedule variance is the earned value minus the planned value. This metric is used to measure the deviation from the planned schedule and indicates if the project is ahead or behind schedule. A positive schedule variance means the project is ahead of schedule, while a negative value indicates it is behind schedule. It helps project managers track progress and make necessary adjustments to ensure timely completion of the project.

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  • 31. 

    What are the dollars included in a cost estimate to allow for future situations that are unpredictable (sometimes called 'unknown unknowns') called?

    • Managment Reserves

    • Parametric Modeling

    • Reserves

    • Rough Order of Magnitude

    Correct Answer
    A. Managment Reserves
    Explanation
    Management reserves are dollars included in a cost estimate to account for future situations that are unpredictable or unknown. These reserves are set aside to provide a buffer for any unexpected events or changes that may arise during the project. They are used to cover any additional costs or risks that were not initially accounted for in the estimate. Management reserves are a proactive measure to ensure that there is enough funding available to handle unforeseen circumstances and keep the project on track.

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  • 32. 

    What is the portion of approved total cost estimate planned to be spent on an activity during a given period called?

    • Actual Cost

    • Rough Order of Magnitude

    • Planned Value

    • Life Cycle Costing

    Correct Answer
    A. Planned Value
    Explanation
    Planned Value refers to the portion of the approved total cost estimate that is planned to be spent on an activity during a specific period. It is a measure used in project management to track and assess the progress and performance of a project. By comparing the Planned Value with the Actual Cost, project managers can determine if the project is on track and within budget. It helps in forecasting and controlling project costs, ensuring that resources are allocated efficiently and effectively.

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  • 33. 

    The processes required to ensure that the project is completed within the approved budget are known as ___________________.

    • Project Cost Management

    • Parametric Modeling

    • Rate of Performance

    • Schedule Performance Index

    Correct Answer
    A. Project Cost Management
    Explanation
    Project Cost Management refers to the processes and activities involved in estimating, budgeting, and controlling costs throughout the project's lifecycle. It includes activities such as cost estimation, cost budgeting, and cost control to ensure that the project is completed within the approved budget. This involves monitoring and controlling project costs, identifying cost variances, and taking corrective actions to keep the project on track financially.

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  • 34. 

    Controlling changes to the project budget is called _____________.

    • Cost Baseline

    • Cost Control

    • Cost Estimating

    • Cost Management Plan

    Correct Answer
    A. Cost Control
    Explanation
    Cost control refers to the process of monitoring and managing the project budget. It involves tracking expenses, comparing them to the planned budget, and taking corrective actions if necessary. Cost control ensures that the project stays within the approved budget and helps to prevent cost overruns. It also helps in identifying areas where cost savings can be made and optimizing the use of available resources.

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  • 35. 

    __________________ is the ratio of earned value to actual cost. It can be used to estimate the projected cost to complete the project.

    • Budget at Completion

    • Cost Performance Index

    • Cost Variance

    • Cost Estimating

    Correct Answer
    A. Cost Performance Index
    Explanation
    The Cost Performance Index (CPI) is the ratio of earned value to actual cost, which indicates the efficiency of the project in terms of cost. It shows how much value has been earned for every dollar spent. By comparing the CPI to 1, we can determine whether the project is over or under budget. If the CPI is greater than 1, it means the project is performing better than expected in terms of cost, while a CPI less than 1 indicates cost overruns. The CPI can be used to estimate the projected cost to complete the project by multiplying it with the remaining budget.

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  • 36. 

    ____________ is known as the the total cost of ownership, or development plus support costs, for a project.

    • Learning Curve Theory

    • Life Cycle Costsing

    • Parametric Modeling

    • Rate of Performance

    Correct Answer
    A. Life Cycle Costsing
    Explanation
    Life Cycle Costing refers to the total cost of ownership, which includes both the development and support costs, for a project. This approach takes into account all the costs associated with the project throughout its entire life cycle, from conception to disposal. It helps in making informed decisions regarding the project's financial viability and identifying areas where cost savings can be made. By considering all the costs involved, Life Cycle Costing provides a comprehensive understanding of the project's total cost and allows for effective budgeting and resource allocation.

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  • 37. 

    What are the costs that can be directly related to producing the products and services of the project known as?

    • Cost Budgeting

    • Budget at Completion

    • Direct Costs

    • Earned Value

    Correct Answer
    A. Direct Costs
    Explanation
    Direct costs are the expenses that can be directly attributed to the production of specific products or services within a project. These costs include materials, labor, and other resources that are directly used in creating the deliverables of the project. Direct costs are essential for determining the overall budget of the project and ensuring that the allocated funds are being used efficiently. By identifying and tracking direct costs, project managers can have a clear understanding of the financial aspects of the project and make informed decisions regarding resource allocation and budgeting.

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  • 38. 

    What is the additional percentage or dollar amount by which actual cost exceed estimates known as?

    • Overrun

    • Additional Cost

    • Cost Overhead

    • Baseline Cost

    Correct Answer
    A. Overrun
    Explanation
    Overrun refers to the additional percentage or dollar amount by which the actual cost exceeds the estimates. It indicates that the project or task has gone over budget or exceeded the initial cost expectations.

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  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 17, 2009
    Quiz Created by
    Aklauss

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