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PK0-004 · Question #753

A project manager is managing an eight-month effort and has to report on the financial health once a month. No changes to the project will be approved going forward. Given the following table: The…

The correct answer is A. The project will burn $36,585, resulting in a net deficit of $11,585. Applying a 10% monthly decrease to the current burn rate over the remaining project months yields a total spend of approximately $36,585, which exceeds the available budget by $11,585.

Tools and documentation

Question

A project manager is managing an eight-month effort and has to report on the financial health once a month. No changes to the project will be approved going forward. Given the following table:

The project’s burn rate is also decreasing by 10% monthly over the remainder of time. Which of the following BEST describes the project’s financial health?

Exhibits

PK0-004 question #753 exhibit 1
PK0-004 question #753 exhibit 2
PK0-004 question #753 exhibit 3

Options

  • AThe project will burn $36,585, resulting in a net deficit of $11,585
  • BThe project will burn $54,615, resulting in a net deficit of $29,615
  • CThe project will burn $40,500, resulting in a net deficit of $15,500
  • DThe project will burn $45,000, resulting in a net deficit of $20,000

How the community answered

(27 responses)
  • A
    67% (18)
  • B
    4% (1)
  • C
    7% (2)
  • D
    22% (6)

Why each option

Applying a 10% monthly decrease to the current burn rate over the remaining project months yields a total spend of approximately $36,585, which exceeds the available budget by $11,585.

AThe project will burn $36,585, resulting in a net deficit of $11,585Correct

Calculating a geometric series with each month's burn rate reduced by 10% from the prior month over the remaining duration produces a cumulative spend of $36,585. When compared against the remaining project budget, this results in a net deficit of $11,585, indicating the project will overspend despite the declining burn rate.

BThe project will burn $54,615, resulting in a net deficit of $29,615

A total of $54,615 would reflect no reduction in burn rate or an incorrect compounding calculation, overstating the projected spend.

CThe project will burn $40,500, resulting in a net deficit of $15,500

A total of $40,500 does not correctly apply the 10% monthly decrease to each successive period's baseline.

DThe project will burn $45,000, resulting in a net deficit of $20,000

A total of $45,000 represents the flat original burn rate with no compounding reduction applied, ignoring the stated 10% monthly decline.

Concept tested: Burn rate calculation with monthly percentage decrease

Source: https://www.pmi.org/learning/library/earned-value-management-project-cost-control-6171

Topics

#burn rate#financial health#cost forecasting#earned value

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