PM Test Center

Which of the following estimating types provides the most accuracy?

A. Parametric
B. Analogous
C. Bottom-up
D. Top-down

Answer: C. Bottom-up
Bottom-up estimating, which may also be called grass roots, engineering, or definitive estimating, will provide the most accuracy since activities are estimated with the greatest level of detail. However, that level of accuracy comes at a cost. In order to be more accurate than parametric and analogous, it will also take the longest amount of time to create.

There are two projects being evaluated but only one can be undertaken. Your finance department decides to use Benefit Cost Ratio (BCR) to help make the decision. Before they even perform the BCR, they inform you that a possible outcome is that neither is a good fit for the organization and you may have to find another solution. After completing their analysis they determine that Project A has a BCR of 0.8 and Project B has a BCR of 0.6. Based on their BCR scores, you should:

A. Choose Project A
B. Choose Project B
C. Choose neither and seek alternative projects
D. Ask for more information to make a decision

Answer: C. Choose neither and seek alternative projects
A Benefit Cost Ratio (BCR) weighs benefits against costs. A BCR of 1.0 means that benefits equal costs. Anything over 1.0 represents that benefits outweigh the costs. For instance, a BCR of 3.5 means that benefits are 3.5 times the costs. Conversely, a BCR of under 1.0 shows that the costs outweigh the benefits. Unless the project must be completed, such as meeting a regulatory requirement, a BCR under one should not be started. In this example, both projects have a BCR of under 1.0.

Jamie, the project manager for creating a new product, recognizes that she will need help estimating. Since she has not managed a project like this before, she decides she will review past projects that company has completed for other products. This is an example of:

A. Analogous estimating
B. PERT
C. Expert judgment
D. Parametric estimating

Answer: A. Analogous estimating
Analogous estimating leverages historical information from a previous similar project. It is typically used when there are limited details on the project.

One of your monthly reports claim that your project has a CV of 2000. How would you describe it to your sponsor?

A. The project is $2000 over budget
B. The project is $2000 under budget
C. CV of anything over 1000 is irrelevant
D. Not enough information

Answer: B. The project is $2000 under budget
CV (cost variance) is simply a measure of how the project is performing in terms of cost. A positive number is good, under budget, while a negative number is bad, over budget. CV is derived from EV (earned value) minus AC (actual cost).

While planning your budget, you decide to categorize your types of costs. Labor, the biggest cost on the project, is best categorized as a(n):

A. Fixed cost
B. Variable cost
C. Direct cost
D. Indirect cost

Answer: C. Direct cost
Direct costs are those that attribute directly to a particular project. Conversely, indirect costs typically benefit multiple projects, such as overhead costs. One way to look at fixed costs vs. variable costs is that the former do not change as production changes.

Part of your project includes building one hundred widgets. You know that it will take longer and be more costly to do the first widget as opposed to the one-hundredth widget because of improved efficiency. This is known as:

A. Historical information
B. Bottom up estimating
C. Learning curve
D. PERT estimating

Answer: C. Learning curve
A learning curve will lead to improved efficiency since your team will be more experienced as they build the widgets. This is a form a parametric estimating.

During the project selection stage, you learn that the value of Project A is $100,000 and the value of Project B is $75,000. Ultimately, Project A was chosen. As a result, the opportunity cost of that decision is:

A. $100,000
B. $75,000
C. $25,000
D. $175,000

Answer: B. $75,000
The opportunity cost is simply the value of the project not chosen. There is no math involved.

The PERT formula is typically calculated as:

A. (O+M+P)/6
B. (O+4M+P)/6
C. (O+M+P)/3
D. (O+4M+P)/3

Answer: B. (O+4M+P)/6
PERT is a weighted average, typically with emphasis on the most likely (M). PERT is a weighted average, typically with emphasis on the most likely (M). So if you are going to calculate 1x optimistic plus 4x most likely plus 1x pessimistic, then there are six variables. Therefore, you would divide by six to get a weighted estimate.

Six months into a year-long project your CPI is 0.8. However, your SPI is 1.2. This means that the project is:

A. Ahead of schedule and under budget
B. Ahead of schedule and over budget
C. Behind schedule and under budget
D. Behind schedule and over budget

Answer: B. Ahead of schedule and over budget
For both Cost Performance Index (CPI) and Schedule Performance Index (SPI), 1.0 is exactly as planned, over 1.0 is good and under 1.0 is bad. So in this case, the CPI is bad and SPI is good. In this example, the CPI means you are getting $0.80 of value out of every $1 spent (see CPI — what is it trying to tell me?) while the SPI means you are progressing at 120% (i.e. 20% better than planned) of the baseline.

As the project manager with a cost conscience sponsor, you have been monitoring earned value throughout the year long project. At the halfway point, you report that the CPI is 0.8. This means that the project is:

A. Ahead of schedule
B. Under budget
C. Behind schedule
D. Over budget

Answer: D. Over budget
The Cost Performance Index (CPI) determines how much value you are earning per $1 spent. A CPI of 1.0 means you are on target and means that for every $1 you are putting into the project, you are getting $1 of value in return. Therefore, a CPI of 1.5 means that you are getting $1.50 for every $1 you put in, which is a good thing. Conversely, a CPI of 0.8 represents only getting $0.80 per $1, not so good. In short, over 1.0 is good, under 1.0 is bad.