Question on Peak cost

Submitted by philzs on Fri, 01/23/2015 - 02:48

Guys.. I would need help to understand this question

it's from Oliver Lehmann

You are assigned as a project manager for an internal project. During cost planning and budgeting you discovered that there are peak times of costs during the project and other times when costs are fairly low. What could this mean for the project?

1 The fiscal budget mechanism which is used by the performing organization may not allow for cost peaks in your project, and you may have to level out expenditures over time.

2 You can silently create budget contingencies during low-cost periods and re-use them later during those periods when you have to cover peak levels in project costs.

3 You may find another project manager with a project that has a different rhythm of high and low costs. Then, you may be able to move budget during one project’s low cost periods to the other project.

4 You are a project manager and work with a lifecycle budget for your project. Fiscal budgets are a matter of the functional organization, and you have generally not to care about them.

The answer is 1, but this kind of question is difficult.. I am not sure to understand it

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admin

Fri, 01/23/2015 - 04:00

I am not sure. The question does not have enough data to pick option 1 as the answer. by theory of elimination 3 and 4 dont make sense . so its either 1 or 2.

  • I was more inclined towards option2 . because the question does not say that organization has any issue with the peaks

Maybe there is a reason ,but not to worry about for PMP exam. Such questions are not asked.

babai

Fri, 01/23/2015 - 07:15

I disagree. It is a responsibility of PM to identify and manage risks. He is not expected to not care.

But again - it is not evident at all.

philzs

Fri, 01/23/2015 - 13:36

thanks guys !

philzs

Fri, 01/23/2015 - 13:38

By the way

The Answer is 1, and point to this paragraph in PMBOK

7.3.2.5 Funding Limit Reconciliation
The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. A variance between the funding limits and the planned expenditures will sometimes necessitate the rescheduling of work to level out the rate of expenditures. This is accomplished by placing imposed date constraints for work into the project schedule.

babai

Fri, 01/23/2015 - 17:27

I am sorry - i revised option 2. It might be , but a suspicious word "silently".

And contingency reserve doesn't mean that you got cash in your pockets to pay expenses.