PMAN 650 Spring 2020 Midterm Exam: Project Management Principles

This document presents a comprehensive solution to a project management midterm exam, covering a wide range of topics. The solution includes multiple-choice questions addressing WBS creation, cost baselines, and project finance. Short answer questions delve into key concepts such as work package characteristics, cost estimating ratios, the relationship between project cost, schedule, and scope, and the application of earned value analysis. Detailed explanations are provided for cost accounting, reasons for resisting changes in performance measurement baselines, and the cost of quality. Furthermore, the solution encompasses project exercises that involve calculations for earned value, cost variance, schedule variance, and forecasting, providing a practical application of the concepts. The assignment demonstrates an understanding of project management principles and techniques, making it a valuable resource for students seeking to enhance their knowledge and skills in the field.

Running head: PROJECT MANAGEMENT
Project management
Name of the Student
Name of the University
Author’s Note

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Table of Contents
1. Multiple choice............................................................................................................................2
2. Short answer................................................................................................................................5
2.1 Characteristics of work package............................................................................................5
2.2 Cost baseline and difference between cost baseline and the performance measurement
baseline........................................................................................................................................5
2.3 Cost estimating ratios and the way in which it is used..........................................................6
2.4 Relationship among project cost, schedule and scope...........................................................6
2.5 Way in which earned value give clear picture of schedule...................................................6
2.6 Cost account and the ways in which it is used.......................................................................7
2.7 Reasons for resisting changes within performance measurement baseline...........................7
2.8 Cost of quality and the way in which cost is represented in project cost baseline................8
2.9 Description of two methods that are used for determining the earned value credit..............8
2.10 Reasons of having two measures for same thing.................................................................8
2.11 EV analysis date..................................................................................................................9
2.12 Calculation of budgeted hourly rate....................................................................................9
3. Project exercise..........................................................................................................................10
References......................................................................................................................................12

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1. Multiple choice
Question 1: You are ready to create the WBS. All of the following statements are true
except:
C) Rolling wave refers to how all levels collectively roll up to reflect the work of the project and
only the work of the project.
Question 2: The approved cost baseline does not include:
B) Summary Level Planning Budget
Question 3: As the project finance manager, you have given the project manager a
numbering system to assign to the WBS for a new project. Which of the following is true?
C) The numbering system is a unique identifier known as the WBS dictionary, which is used to
track the descriptions of individual work elements.
Question 4: You know all of the following statements are true regarding the Control Costs
process except:
A) A description of how cost changes should be managed and controlled is found in the cost
management plan.
Question 5: You are the project finance manager and you’re preparing your cost
management plan. You know all the following are true regarding this plan except:
D) Control thresholds should be described in the plan as to how estimates will adhere to
rounding ($100 or $1000, and so on).

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Question 6: Which of the following statements is true?
D) Sprint costs are basically the personnel costs of the agile team over the length of the
anticipated sprint
Question 7: Which of the following is displayed as an S-curve?
B) Cost baseline
Question 8: A negative result from a Cost Variance (CV) calculation means which of the
following:
A) AC is higher than EV
Question 9: Which WBS elements are specifically assigned resources, durations, and logical
relationships by estimators and schedulers?
D) All elements at the X.X.X level (e.g., 2.1.1, 2.1.2, etc.)
Question 10: With respect to the process for developing a cost baseline, all of the following
statements are true except:
C) This process assigns cost estimates for expected future operating costs.
Question 11 & 12: Control account work
Control
Account
Scheduled
Start
Scheduled
Completion
Budgeted
Value
EV Progress Rule
1 4/3/2019 7/30/2019 10,000 Percent Complete with Gates (Note 1)
2 6/5/2019 7/6/2019 3,000 Fixed Formula: 50/50
3 6/26/2019 7/6/2019 1,000 Fixed Formula: 0/100

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4 6/12/2019 6/30/2019 2,000 Fixed Formula: 30/70
5 5/14/2019 8/11/2019 15,000 Weighted Milestones (Note 2)
Direct labour cost=$100; Overhead cost=$90;
Milestone 6- Earned value: 2250
Total =15,000
Earned value= 6750
Milestone (3,000) +Milestone 2 (2250) + Milestone 3(1500)
Control account 1- Earned Value: 5,000
Control Account 2- Earned value:1500
Control Account 3- Earned Value: 0
Control account 4- Earned Value: 2,100
Control Account 5- Earned Value: 6,750
What is the EV for Control Account 3?
D) $0
What is the EV for Control Account 5?
B) $6750

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2. Short answer
2.1 Characteristics of work package
A work package is one of the groups of related tasks within the project which are further
broken down for creating the work breakdown structure. The characteristics of work package are
listed below:
 Specifies budget in the form of proper measurable units like dollar
 Limits the entire work that is performed for facilitating project tracking (Kerzner, 2017).
 Contains clearly defined start and finish dates which further represents tangible
accomplishments
2.2 Cost baseline and difference between cost baseline and the performance measurement
baseline
Cost baseline is defined as one of the authorized time phased spending plan for the entire
project on which the entire cost performance is properly measured.
Cost baseline Performance measurement baseline
The cost baseline is considered as basis for
the reporting system for earned value. It is
considered as the budget for the cost that is
estimated over the entire project time period
(Marchewka, 2016).
It is one of the time-phased resource plans
against which the accomplishment of project
work can be effectively measured.

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2.3 Cost estimating ratios and the way in which it is used
An estimating rate one of the simple ratios that is mainly utilized for estimating cost or
price quite effectively.
Cost estimating ratios are helpful in making the right commitment of dollars within the
business activity effectively. This particular procedure generally utilizes every bit of experience,
research as well as the entire decision-making procedures (Hornstein, 2015).
2.4 Relationship among project cost, schedule and scope
It is found that managing a project effectively are generally considered as a proper series
of trade-offs for keeping the entire project on track for successful project completion.
Schedule: It is the amount of time that is mainly allocated within the project for
completing the project work successfully (Kerzner, 2018). It is found that Gantt chart is one of
the ways that is utilized for visualizing the timeline, dependencies as well as durations of the
project.
Cost: The financial commitment of the entire project is generally dependent on a number
of variables including resources, materials as well as labour costs. If the time of the project
increases then the total cost of the project generally increases.
Scope: It is necessary manage the project scope quite effectively in the project so that the
entire projects gets executed within the estimated time span as well as budget.
2.5 Way in which earned value give clear picture of schedule
It is found that earned value generally helps in giving a proper as well as clear picture in
comparison to the simple plan versus the actual plan as the earned value related system generally
includes the time variable that is helpful in measuring the progress. In addition to this, it is found

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that plan versus the actual cost generally leads to a number of false conclusions. Furthermore,
earned value is further helpful in measuring the work that is mainly accomplished for the money
that is mainly spent (Badewi, 2016).
2.6 Cost account and the ways in which it is used
Cost accounting is a form of managerial accounting which mainly aims for capturing the
total production by properly identifying the variable cost in each of the step of production as well
as fixed costs.
The cost accounting is mainly utilized internally by the management of the organization
for properly taking business related decisions. It is found that cost accounting is generally
concerned with proper development of understanding where the company generally earns as well
as losses money by giving proper input related decisions for effectively generating profits (Serra
& Kunc, 2015). It further helps in defining costs as well as direct material, fixed overhead as
well as period-based cost.
2.7 Reasons for resisting changes within performance measurement baseline
The integrity as well as usefulness of the project baseline is considered as one of the
mechanisms that is mainly used for the process of monitoring progress as well as for tracking the
problem effectively. This further can be effectively eroded by effectively changing the baseline
of the project. Thus, changes within the baseline of the project must be limited to the major
scope changes and for example, when the entire project gets failed then the change is helpful in
representing a proper improvement within the project. Furthermore, the customers are helpful in
managing the scope changes properly (Hu et al., 2015). Moreover, the scope changes can
generally come different personnel of the project including significant design changes. Natural
disasters generally help in forcing the baseline change and therefore the elimination of cost

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account can further result in proper change within the baseline of the project. Additionally, small
changes for errors as well as cost must not be undertaken including different types of planning
errors. Changes for improving performance can further make changes within the baseline of the
project.
2.8 Cost of quality and the way in which cost is represented in project cost baseline
Cost of quality is defined as one of the measures that helps in quantifying the cost of
control as well as the cost of failure. It further helps in summing up the entire cost that is mainly
related with the prevention as well as detection of the defects as well as the cost due to
occurrence of a number of issues.
Cost baseline is generally created by effectively estimating the cost by the particular
period which the entire project would be effectively completed. The cost estimation is mainly
illustrated within the S curve (Hoda & Murugesan, 2016). Furthermore, the measurement of
different project performance related aspects helps in ensuring that the entire cost is effectively
evaluated in context to the overall yield of the project.
2.9 Description of two methods that are used for determining the earned value credit
The two methods that are mainly utilized in order to properly determine the earned value
related credit are mainly elaborated below:
 By earned value analysis
 By utilizing the measuring the amount of work that is mainly performed within the project
2.10 Reasons of having two measures for same thing
It is found that cost variance as well as cost performance index that is mainly utilized for
determining whether the entire project is on budget as well as under budget or over budget. It is

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found that both cost variance as well as CPI are used for the same thing. It is found that cost
variances help in comparing the budget that is mainly set before the initiation of the project and
what was mainly spent. This is further calculated by properly finding the different between
BCWP as well as ACWP (Andersen, 2016). Furthermore, CPI is one of the ratios that helpful in
measuring the financial effectiveness of the project b properly dividing the budgeted cost of the
work that is mainly performed by the actual cost that is mainly measured.
2.11 EV analysis date
Gate 1= Complete (20%)
Gate 2=1/2 Complete (10%)
Total work= 20%=10%= 30%
EV=% of work complete X completion budget
=30%of $1,000
=1000*30/100
=$300 (=EV as of now)
2.12 Calculation of budgeted hourly rate
Overhead rate=90%
G&A rate is 25%
Labour rate $100
Burdened hourly rate= 90+25=$115

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3. Project exercise
Time= 1 year
Cost of the project $12,500/month
After 6 months 50% project is complete
Spending’s= $70,000
FORMULA VALUE
BUDGET Budget at Completion (BAC)
Cost/month project
duration
$12500X 12= 150,000
Planned Value (PV)
(Planned % Complete)
X (BAC)
50% X 150,000
=75,000
CURRENT PROGRESS
Earned Value (EV)
% of completed work
X BAC (Budget at
Completion).
(50/100) X 150,000
= 75,000
Actual Cost (AC) AC= Spending’s $70,000
Cost Variance (CV)
Earned value- Actual
cost
$75,000-$70,000
=$5,000
Schedule Variance (SV)
Earned value- Planned
value
=75,000-75,000
=0
Cost Performance Index
(CPI)
CPI= EV/ AC 1.0
Schedule Performance Index SPI = EV / PV 1

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(SPI)
FORECASTING
Estimate at Completion
(EAC)
Budget at completion
(BAC) / Cost
performance index
(CPI)
$150,000
Estimate to Complete (ETC) BAC- EV
$150,000-75,000
=75,000
Variance at Completion
(VAC)
Total Budgeted Cost –
Estimate at Completion
(EAC)
$150,000-$150,000= $0

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References
Badewi, A. (2016). The impact of project management (PM) and benefits management (BM)
practices on project success: Towards developing a project benefits governance
framework. International Journal of Project Management, 34(4), 761-778.
Serra, C. E. M., & Kunc, M. (2015). Benefits realisation management and its influence on
project success and on the execution of business strategies. International Journal of
Project Management, 33(1), 53-66.
Andersen, E. S. (2016). Do project managers have different perspectives on project
management?. International Journal of Project Management, 34(1), 58-65..
Kerzner, H. (2015). Project management 2.0: leveraging tools, distributed collaboration, and
metrics for project success. John Wiley & Sons.
Kerzner, H. (2017). Project management: a systems approach to planning, scheduling, and
controlling. John Wiley & Sons.
Kerzner, H. (2018). Project management best practices: Achieving global excellence. John
Wiley & Sons.
Hornstein, H. A. (2015). The integration of project management and organizational change
management is now a necessity. International Journal of Project Management, 33(2),
291-298.
Marchewka, J. T. (2016). Information technology project management: Providing measurable
organizational value. John Wiley & Sons.

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Carvalho, M. M., & Rabechini Jr, R. (2017). Can project sustainability management impact
project success? An empirical study applying a contingent approach. International
Journal of Project Management, 35(6), 1120-1132.
Hoda, R., & Murugesan, L. K. (2016). Multi-level agile project management challenges: A self-
organizing team perspective. Journal of Systems and Software, 117, 245-257.
Demirkesen, S., & Ozorhon, B. (2017). Impact of integration management on construction
project management performance. International Journal of Project Management, 35(8),
1639-1654.
Kermanshachi, S., Safapour, E., Anderson, S., Molenaar, K., & Schexnayder, C. (2019, January).
Development of the Cost Baseline for Achieving Excellence in Rural Transit Facilities.
In Transportation Research Board 98th Annual Meeting.
Takey, S. M., & de Carvalho, M. M. (2015). Competency mapping in project management: An
action research study in an engineering company. International Journal of Project
Management, 33(4), 784-796
Hu, Y., Chan, A. P., Le, Y., & Jin, R. Z. (2015). From construction megaproject management to
complex project management: Bibliographic analysis. Journal of management in
engineering, 31(4), 04014052.