Practice Test

True or False: Variance analysis is a tool that helps in identifying the differences between planned and actual performance.

  • True
  • False

Correct Answer: True

Explanation: Variance analysis is a key to effective project management as it enables managers to identify differences between planned and actual performance.

Which of the following are essential elements involved in analyzing variances and trends in costs, schedule, quality, and risks?

  • A. Planned Values
  • B. Actual Performance
  • C. Forecasted Values
  • D. Personal Judgments

Correct Answer: A, B, C

Explanation: To analyze variances and trends, it’s necessary to compare planned values with actual performance and forecasted values. Personal judgments aren’t necessarily a quantifiable factor in this kind of analysis.

True or False: Variances, once identified, cannot be corrected.

  • True
  • False

Correct Answer: False

Explanation: When variances are identified, corrective actions can be implemented to address discrepancies. This is a key aspect of project management.

What is the best action to take when the actual cost exceeds the budgeted cost?

  • A. Take no action
  • B. Reduce quality
  • C. Identify corrective action
  • D. Increase budget

Correct Answer: C. Identify corrective action

Explanation: When actual cost exceeds the budgeted cost, it’s essential to identify corrective action to control costs and prevent further overruns.

Multiple Select: Corrective actions based on variance and trend analysis may include:

  • A. Schedule adjustments
  • B. Cost adjustments
  • C. Quality control
  • D. Ignoring the variance

Correct Answer: A, B, C

Explanation: When variances are identified, corrective actions such as adjusting schedules, costs, or ensuring quality control measures may be required. Ignoring the variance will likely lead to further discrepancies.

True or False: Trends should not play a significant part in forecasting.

  • True
  • False

Correct Answer: False

Explanation: Trends provide important information about the progression over time and are quite valuable for forecasting future performance.

In terms of risk forecasting, which is NOT a key factor to consider?

  • A. Past Risks
  • B. Planned Values
  • C. Future Risks
  • D. Cost of Risk Mitigation

Correct Answer: B. Planned Values

Explanation: While planned values are important in variance analysis, they don’t directly tie to risk forecasting.

What is the primary purpose of comparing actual values to forecasted values in project management?

  • A. To create additional work
  • B. To identify opportunities for change
  • C. To pass the blame for discrepancies
  • D. None of the above

Correct Answer: B. To identify opportunities for change

Explanation: The aim of comparing actual values to forecasted values is to identify discrepancies and opportunities for corrective actions, not to assign blame or generate unnecessary work.

Which one is NOT a benefit of variance analysis in project management?

  • A. Predicting future performance
  • B. Identifying problem areas early
  • C. Covering up mistakes
  • D. Facilitating strategic decision-making

Correct Answer: C. Covering up mistakes

Explanation: The aim of variance analysis is to uncover problems, not to cover up mistakes.

True or False: Forecasting is an exact science and is always 100% accurate.

  • True
  • False

Correct Answer: False

Explanation: Although forecasting uses statistical methods to predict future outcomes, it is not 100% accurate as it is based on assumptions and projections. It should be used as a guideline, not a certainty.

Interview Questions

What is the primary purpose of variance analysis in project management?

The primary purpose of variance analysis in project management is to identify differences between planned and actual performance. This aids in deciding whether to take corrective action or make adjustments to the project plan based on these differences.

How can trend analysis be used in project management?

Trend analysis can be used in project management to predict future performance based on past data. It helps identify patterns and trends that could indicate potential issues or opportunities in project progression.

What type of corrective actions might be necessary when actual costs exceed planned values?

Corrective actions could include negotiation with suppliers for lower costs, reassessing the project scope, re-allocating resources, or revisiting the project schedule to reduce costs.

How can risks be identified by comparing actual and forecast to planned values?

By comparing actual and forecast to planned values, one can identify deviations indicating risks. For example, if actual costs are significantly higher than planned, this could indicate a risk of budget overrun.

What is meant by forecast values in project management?

Forecast values in project management refer to the predicted or expected cost, schedule, quality and risks. They are derived based on the current performance and trends of the project.

What are some possible opportunities that might be identified when analyzing variances and trends in costs, schedule, quality, and risks?

Possible opportunities could include the realization of cost savings due to efficiencies in project execution, a schedule that’s ahead of plan, improvements in quality, or a risk that didn’t materialize.

In what ways does analyzing trends in quality differ from analyzing trends in costs?

Analyzing trends in quality might focus on areas such as defect rates, customer satisfaction, or process maturity. On the other hand, analyzing trends in costs would involve examining expenditures and identifying any trends indicating over or under-spending.

What role does a program manager play in the analysis of variances and trends?

A program manager plays a crucial role in the analysis of variances and trends by determining the significance of any variances, identifying corrective actions or opportunities, and making decisions to adjust the project plan as required.

How are planned values determined in project management?

Planned values in project management are determined during the planning phase, based on the project’s schedule and budget, quality requirements, and anticipated risks.

How can a program manager ensure that an actual-versus-forecast analysis provides accurate information for decision making?

A program manager can ensure accuracy in an actual-versus-forecast analysis by establishing a robust process for data collection, maintaining consistent measuring and reporting methods, and regularly reviewing and updating forecasts.

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