PM Test Center

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.

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.