Certification Insider

The following PMP® exam sample question is taken from the Free PMP Exam Simulator (The answer is at the very bottom):

You are currently performing planning for a construction project. Your project sponsor asks you to send him your project's Resource Breakdown Structure so that he can present it to his senior management during an upcoming meeting. You have not yet developed the Resource Breakdown Structure for your project. Which process do you need to start in order to develop it?

A) Estimate Activity Resources    
B) Plan Human Resource Management    
C) Develop Project Management Plan    
D) Acquire Project Team

Hint:

The Resource Breakdown Structure is a hierarchical structure of the identified resources broken down by resource category and resource type.

Answer and Explanation:

The Correct Answer is A. The Resource Breakdown structure (RBS) is a hierarchical structure of the identified resources, broken down by resource category and resource type. The RBS is developed during the Estimate Activity Resources process.

*All our questions are updated to the latest PMBOK® Guide standard. Stop by at http://free.pm-exam-simulator.com and try the PMP Exam Simulator free for 3 days. We also offer 110 free questions at http://www.free-pm-exam-questions.com. We are a PMI Registered Education Provider.

While there are about 50 formulas that you need to know for Project Management Professional (PMP)® Exam success, there are only seven that are absolutely necessary to know for the PMI Agile Certified Practitioner (PMI-ACP)® Exam.

Even better, for the first three we are going to discuss you don’t even need to know the formula. What you do need to know for them is how to handle the results of the calculations, which is: “The larger value is the better value”. Here they are:
 

1. Internal Rate of Return (IRR)

IRR is used as a capital project budgeting metric to determine if an investment should be made. It looks at the present value of the cash flows as compared to the initial investment which results in an IRR value. For example, if as a Project Manager you need to compare two or more projects to determine which one would be the better investment for your organization you can use IRR to do this. If you are given the IRR for three projects; Project A IRR =25%, Project B IRR = 30%, and Project C IRR = 12% you can determine that Project B is the better investment for the organization because it has the largest IRR value.
 

2. Net Present Value (NPV)

NPV is used as a capital project financial metric to analyze the profitability of an investment at the time of review. It looks at the present values of cash inflows and the present values of cash outflows resulting in an NPV value. A Project Manager can compare the NPV value of one or more projects to determine which project is a more profitable investment. For example Project A has an NPV of $2.3M, Project B has an NPV of $2M, and Project C has an NPV of $2.1M. Project A has the greater NPV and is the best investment for the organization.
 

3. Return on Investment (ROI)

ROI is used to evaluate the money gained or lost in relation to the money invested in a project. ROI is also often referred to as gain/loss, profit/loss, or net income/loss. A Project Manager can use the ROI of one or more projects to determine which project is the better investment. For example if Project A has an ROI of 27%, Project B has an ROI of 25%, and Project C has an ROI of 30%; Project C would be the better investment since it has the largest ROI.

The next four formulas we are going to discuss are true formulas because you will need to know specific information in order to perform each of the calculations discussed below.
 

4. Cost Variance (CV)

CV is the Earned Value minus the Actual Cost (CV=EV-AC) of a project. This formula measures the cost performance of a project, and looks at whether the project is on budget or not. In order to calculate CV you need two pieces of information, the earned value and the actual cost of the project. If a CV result is a negative number the project is over budget, which is bad. If a CV result is a positive number the project is under budget, which is good. If CV is zero, then the project is exactly on budget. For example project A has an earned value of $75.1M and an actual cost of $75.3M. The CV calculation would look like: CV= $75.1M - $75.3M; resulting in a CV of -$0.2M; this project is over budget. Another example would be Project B has an earned value of $15M and an actual cost of $14.5M. The CV calculation would look like: CV=$15M - $14.5M; resulting in a CV of $0.5M; this project is under budget.
 

5. Cost Performance Index (CPI)

CPI is Earned Value divided by Actual Cost (CPI=EV / AC). CPI measures the cost performance of a project; is the project budget being spent as planned? In order to calculate CPI you need two pieces of information, the earned value and the actual cost of the project. There are three possible results when calculating this: CPI = 1 is good and means funds are being used as planned; CPI >1 is also good and means the funds are being used more efficiently than planned; and CPI <1 is bad and means the funds are being over spent.
 

6. Schedule Variance (SV)

SV is the Earned Value minus the Planned Value (SV=EV-PV) of a project. This formula measures the schedule performance of a project, and looks at whether the project is behind schedule or ahead of schedule. In order to calculate SV you need two pieces of information, the earned value and the planned value of the project. If an SV result is a negative number then the project is behind schedule, which is bad. If an SV result is a positive number then the project is ahead of schedule, which is good. If SV is zero, then the project is exactly on schedule. For example project A has an earned value of $75.1M and an actual cost of $74.2M. The CV calculation would look like: CV= $75.1M - $74.2M; resulting in a SV of $0.9M; this project is ahead of schedule.
 

7. Schedule Performance Index (SPI)

SPI is Earned Value divided by Planned Value (SPI=EV / PV). This formula measures the schedule performance of a project, is the project performing as planned? In order to calculate SPI you need two pieces of information, the earned value and the planned value of the project. There are three possible results when using this formula: CPI = 1 is good and shows the project is progressing as planned; CPI >1 is also good and shows the project is progressing at a faster rate than planned; and CPI <1 is bad and shows the project tis progressing at a slower rate than planned.

As you can see, the focus on the PMI-ACP® Exam is not really on the mathematics. For this exam it is more important to understand the concepts, methods, tools and techniques as well as the Agile Manifesto in order to pass. However, a good understanding of these seven formulas will go a long way.

If you are preparing for the PMP or CAPM exam, then you need to have a study plan. As an experienced project manager you know the value of a project plan. So practice what you preach as you prepare for the exam. Be a planner, and apply good project management best practices in the process.

An example of a study plan for the PMP Certification is as follows:

•  Go through your studies and training in no more than 2-4 months. Set a schedule, and stick to it. Review the appropriate section of the PMBOK Guide with every topic in the training.
•  Purchase a PMP exam prep course and include it into your plan. Print out study aids that are part of the particular training module, especially if these cover topics that you find difficult. After finishing the course, take simulated exams.
•  Find out what your strengths and weaknesses are. This will make you a little sharper and alert for information as you continue the training. You can take another full PMP or CAPM exam simulation every 1-2 weeks, and adjust your study plan based on results.
•  In the last month leading to the exam, use a PMP Exam Simulator to identify your trouble areas by using flashcards and other training materials. Aim for 80-90% scores during your simulated tests as you get close to the actual exam. This will give you confidence that you are ready to pass, and if the scores are lower, will give you more impetus to work harder.
•  Read books, online materials, free templates, listen to podcasts, and any other materials that fit your learning style to see things from different angles and approaches.

The key really is to practice good project management and you will succeed. Increase your chances of project management exam success with a plan.

Practice makes perfect, so test your PMP knowledge right now with the following 15 free PMP Exam sample questions in an online exam:

http://free.pm-exam-simulator.com/index.php/sechsgratis

This exam is just one of a series of 8 exams. To sign up for all our free exams please visit http://www.free-pm-exam-questions.com/
 

The following PMP® exam sample question is taken from the Free PMP Exam Simulator (The answer is at the very bottom):

You are currently managing the development of a security system. This project involves the use of some brand new, state-of-the-art technology, which has not yet been adequately tested. You are currently decomposing your project work packages into activities. You are facing problems decomposing the 'Test the System' work package into the final activities required to complete the work package. Detailed testing plans and activities cannot be determined until the system is at least 50% developed and more details become available. The 'System Development' work package will take at least a couple of months to complete. What is the best way to resolve this problem?

A) Obtain expert judgment on the system testing work package and decompose it now before executing the system development work package    
B) Decompose the system development work package now and decompose the system testing work package later  
C) Break down the project into multiple phases so that the system testing work package goes into the second project phase. This will allow you to plan for the second phase after the end of the first phase    
D) Consult your Project Management Plan to determine what to do in this situation

 Hint: You should use Rolling Wave Planning.

All our questions are updated to the latest PMBOK® Guide standard. Stop by at http://free.pm-exam-simulator.com and try the PMP Exam Simulator free for 3 days. We also offer 110 free questions at http://www.free-pm-exam-questions.com. We are a PMI Registered Education Provider.

Answer and Explanation:

The Correct answer is B. "You cannot obtain expert judgment about the issue, because (as the scenario hints) this expert judgment for the state-of-the-art technology is not available. Breaking up the project scope into multiple phases just for the sake of obtaining an escape route for project planning is never a good idea. Projects are divided into multiple phases to obtain more control over the project and the deliverables, not to solve one minor issue of decomposing your WBS. Also, as you are currently planning your project, your project management plan is unfinished; it can't help you at this point in time. The only valid approach is that you should use Rolling Wave Planning and decompose the system development work package now and then decompose the system testing work package later, when more project information becomes available."