PM Test Center

If the BAC is 1000, the EAC is 1200, and the ETC is 900, what is the VAC?

A. -200
B. -100
C. 100
D. 200

Answer: A. -200
The VAC (variance at completion) is just a matter of figuring out delta between how much you thought you were going to spend before the project started, the budget at completion (BAC), and how much you think the project is going to cost knowing what you know today, the estimate at completion (EAC). So in this example, the VAC is -200, since VAC = BAC – EAC. That means the project is expected to cost $200 more than originally planned.

If the EAC is 2000, the PV is 500, and the AC is 400, what is the ETC?

A. 1100
B. 1500
C. 1600
D. 1900

Answer: C. 1600
The ETC (estimate to complete) is actually quite simple. Just figure out take the EAC (estimate at completion) and subtract the AC (actual cost), or ETC = EAC-AC; the PV is irrelevant for the ETC. What you are doing is looking at the difference between the updated estimate on how much the project will cost, EAC, and how much you have already spent, AC. The result is how much more you expect to spend to complete the project, EAC.

If the BAC is 1000, the CPI is 0.9, and the SPI is 1.2, what is the EAC?

A. 833.33
B. 900
C. 1111.11
D. 1200

Answer: C. 1111.11
One method that the EAC (estimate at completion) can be calculated is BAC (budget at completion) divided by CPI (cost performance index), or EAC = BAC/CPI; the SPI is irrelevant for the EAC. Because the CPI is under 1.0, then you know that the project is not doing well. Therefore, you can conclude that the project will cost more than originally planned, which is 1000, the BAC, without even doing any math. One way to look at the problem is “If this $1000 project is only getting $0.90 of value out of every dollar so far, if we continue at this pace, how much will this project cost by the time we are done?”

Joan has been assigned to manage a project to recondition ten school buses. Although her company has never reconditioned more than a single bus at a time, Joan feels she can still give somewhat accurate estimates by using:

A. Bottom-up estimating
B. Analogous estimating
C. Parametric estimating
D. Engineering estimating

Answer: C. Parametric estimating
Parametric estimating takes historical information available and scales it provide time and cost estimates. In this example, if a typical school bus reconditioning project takes twenty days and costs $10,000, then reconditioning ten of them will simply take 200 days at $100,000. The project manager may then use expert judgment to fine-tune the estimate for learning curves, overlapping tasks, etc.

One of the reports you are asked to produce is an S-curve diagram. Through your experience, you know that S-curve data is based on earned value. Therefore, you must __________ at the start of the project in order to have accurate S-curve reports.

A. Set a baseline
B. Use project management software
C. Create a contingency plan
D. Perform a variance analysis

Answer: A. Set a baseline
In order to provide earned value, a baseline must be set, usually at the beginning of the project. This will allow project managers to measure the original snapshot against actual performance.

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.