PM Test Center

You are halfway through your project and your sponsor would like to know how much the project is expected to cost when it is completed. What earned value metric should you use?

A. CV
B. AC
C. EAC
D. ETC

Answer: C. EAC
EAC (Estimate at Completion) tells you that the project is expected to cost x dollars. This is derived from how much you thought it would cost from the beginning (BAC) and what the rate of spending is (CPI).

Your company is in the process of deciding whether to continue with Project A or terminate it and begin Project B instead. You have already invested 12 months and $100,000 on Project A. It will take another 24 months and $50,000 to complete it. Project B is actually a better solution since the end product will result in a greater long-term savings. However, it will take 18 months and $250,000 to complete. Additionally, all time and money spent on Project A already would be wasted. Which project should the company chose?

A. Project A because the company has already spent 12 months and $100,000
B. Project A because it is still more inexpensive than Project B
C. Project B because time and money spent on Project A is irrelevant to the decision
D. Project B because it can be completed in less time than Project A

Answer: C. Project B because time and money spent on Project A is irrelevant to the decision
When a decision is being made from a cost perspective, expended (or sunk) costs are ignored. The goal is to make the best decision regardless of what paths were taken prior to that point in time.

Resource leveling typically results in a:

A. Project cost overrun
B. Project cost savings
C. Project duration longer than the baseline
D. Project duration shorter than the baseline

Answer: C. Project duration longer than the baseline
When resource leveling, work scheduled for resources that are over-allocated will be spread over a longer period of time. As a result, this smoothing out process will usually cause the project to take longer.

While reviewing your weekly report, you notice that two of your resources are over-allocated. One way to solve this is to:

A. Level resources
B. Use PERT
C. Add lag
D. Crash the schedule

Answer: A. Level resources
Of the choices, only leveling resources is the only method that will relieve over-allocated resources. Leveling will take the extra work and move it to a different date so the resources will not exceed their maximum per day.

At your upcoming status meeting with your project sponsor, rather than just using a table, you want to graphically show earned value. Which of the following charts will you use?

A. Trend analysis
B. Control chart
C. S-curve
D. Pareto diagram

Answer: C. S-curve
An S-curve graph typically displays earned value (EV), planned value (PV) and actual cost (AC). PV is charted first and will look like an S. As time progresses, the EV and AC will extend allowing you to compare them against the PV.

While planning a project that has not been accomplished before at the company, your manager asks you to get a three point estimate from Shari, the lead designer. Shari provides you with an optimistic estimate (2 hours), a most likely estimate (4 hours), and a pessimistic estimate (12 hours). What must be the three point estimate for Shari’s task?

A. 5 hours
B. 6 hours
C. 10 hours
D. Not enough information and will need clarification from the manager

Answer: D. Not enough information and will need clarification from the manager
A three point estimate could be derived several ways. Two of the most common are the mean ((O+M+P)/3), which would give you 6 hours and PERT ((O+4M+P)/6), which would give you 5 hours. However, in this example, it is not clear what type of three point estimate to use.

If a project has a Cost Variance (CV) of 1000 and a Schedule Variance (SV) of -1000, what does it mean?

A. The project is under budget and behind schedule.
B. The project is over budget and ahead of schedule.
C. It is impossible to have a negative SV.
D. The Overall Variance (OV) is 0.

Answer: A. The project is under budget and behind schedule.
For both Cost Variance (CV) and Schedule Variance (SV), if the number is positive, then it is good. Conversely, if the number is negative, then it is bad. So CV of 1000 is good (under budget), while SV of -1000 is bad (behind schedule). There is no such thing as Overall Variance (OV).

Megan is working with her finance department to determine depreciation for a warehouse forklift that was purchased. She is told that accelerated depreciation will be used. If the forklift cost $50,000 and Megan wants to spread the depreciation over five years, which of the following will the first year most likely be?

A. $5,000
B. $8,000
C. $10,000
D. $15,000

Answer: D. $15,000
If Megan was asked to use straight line depreciation, then the answer would be $10,000, which is a simple average. For accelerated depreciation, the first year will be higher than the average and incrementally decrease over time. As a result, the first year depreciation could only be $15,000 from this list since it is the only value greater than $10,000.

While determining which project to pursue, your management decides to use net present value (NPV) as the key criteria. If the NPV for Project X is 12,000 and the NPV for Project Y is 15,000, which project should be chosen?

A. Project X
B. Project Y
C. Either can be chosen since the numbers are so close
D. NPV cannot be used to chose projects

Answer: B. Project Y
The net present value (NPV) is basically the value of total benefits minus the costs. It is can be used to determine which project to embark on. If you are comparing project using NPV, the higher the value, the better.

While determining which project to pursue, your management decides to use internal rate of return (IRR) as the key criteria. If the IRR for Project X is 10% and the IRR for Project Y is 8%, which project should be chosen?

A. Project X
B. Project Y
C. Either can be chosen since the numbers are so close
D. IRR cannot be used to chose projects

Answer: A. Project X
The internal rate of return (IRR), in simple terms, is the rate at which inflows and outflows are equal. Often times, it is used to determine which project to embark on. If you are comparing projects using IRR, the higher the percentage, the better.