Back to Agile EVM (Earned Value Management)

Budget at Completion

5 minutes 5 Questions

Budget at Completion (BAC) is the sum of all budgets established for the project; it signifies how much the project is expected to cost upon completion. In Agile EVM, BAC can be set using the cost per story point (using the estimates provided in story points) and the number of features/stories to c…

Test mode:
Start practice test
PMI-ACP - Budget at Completion Example Questions

Test your knowledge of Budget at Completion

Question 1

The Budget at Completion (BAC) represents the total planned value of the project when the project is ________.

Correct Answer: 100% complete

The Budget at Completion (BAC) represents the total planned value of the project when it is 100% complete. This is the correct answer because:

1. BAC is a key project management metric that represents the total approved budget for the entire project.

2. It reflects the sum of all budgeted costs for all scheduled work in the project.

3. The BAC is used as a baseline to measure project performance and is only fully realized when the project reaches 100% completion.

The other options (50%, 75%, and 90% complete) are incorrect because:

1. These percentages represent partial completion stages of a project, not the point at which the total planned value is fully realized.

2. At these stages, only a portion of the BAC would have been earned or spent.

3. The BAC remains constant throughout the project lifecycle and is not associated with any specific percentage of completion other than 100%.

Understanding the BAC is crucial for project managers as it serves as a benchmark for calculating other important project metrics such as Earned Value, Cost Performance Index, and Schedule Performance Index.

Question 2

A project with an initial budget of $1,200,000 is currently 35% complete. However, the actual cost incurred so far is $480,000. Assuming the current spending trend continues, what will be the budget at completion?

Correct Answer: $1,371,429

To calculate the budget at completion (EAC) assuming the current spending trend continues, we first determine the Cost Performance Index (CPI). CPI is calculated as CPI = EV / AC, where EV (Earned Value) is the percentage complete multiplied by the Budget at Completion (BAC). So, EV = 35% x $1,200,000 = $420,000. The Actual Cost (AC) is given as $480,000. Thus, CPI = $420,000 / $480,000 = 0.875. Since the project is expected to continue at this efficiency, the EAC is calculated as EAC = BAC / CPI = $1,200,000 / 0.875 = $1,371,429.

Question 3

You are managing a construction project with a $1,000,000 budget. Currently, the project is 40% complete, but the costs have risen to $460,000 due to unexpected issues with the materials. What is the required budget at completion for this project?

Correct Answer: $1,150,000

In project management, the budget at completion can be adjusted to reflect unexpected changes in costs. In this case, the project has currently spent $460,000 to achieve 40% completion. If costs continue at this rate, the total budget required would be ($460,000 / 0.4) = $1,150,000, indicating that the initial budget of $1,000,000 would not be sufficient. The answers $1,200,000, $1,000,000 and $950,000 are incorrect. $1,000,000 does not account for the additional costs already incurred and that are projected to continue. $1,200,000 and $950,000 are simply not correct based on the calculation.

More Budget at Completion questions
31 questions (total)
Start 31 question test