PMP Question #678: Real Exam Question with Answer & Explanation

Question

A company operates on a 2-year budgeting cycle. The project manager has been assigned a high-visibility project to deliver a brand new, innovative capability. While the requirements for the new capability are defined, the solution design is only beginning. The project manager's boss is concerned that the final solution will exceed the budget for the project. What should the project manager do next to anticipate the budget impacts of the solution?

Options

• AApply earned value techniques that compare planned to actual value delivered at key points in
• BDevelop a work breakdown structure (WBS) and perform activity-based cost estimating.
• CPerform scenario planning on each of the solution designs and incorporate estimates into the next
• DConsult colleagues at other companies and use historical information to predict the final cost.

Explanation

To anticipate budget impacts for a new, innovative project with an early design phase, the project manager should develop a Work Breakdown Structure (WBS) and perform activity-based cost estimating.

Common mistakes.

• A. Earned Value Management (EVM) is a technique for tracking project performance during execution by comparing planned value to actual value, not for anticipating initial budget impacts when the solution design is just beginning.
• C. While scenario planning can be useful for risk, it comes after initial estimates and detailed WBS; without a WBS and activity-based cost estimates, scenario planning on solution designs would lack a solid foundation for budget impact analysis.
• D. Consulting colleagues and using historical information is useful for analogous estimating, but for a 'brand new, innovative capability' where solution design is just beginning, a more bottom-up, detailed approach like WBS and activity-based estimating is required for better accuracy.

Concept tested. Cost estimating and budgeting techniques

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