A project manager is quantifying contingency for a project with two risks: Risk A has a 50% probability of causing a $100,000 cost overrun, and Risk B has a 10% probability of causing a $500,000 cost overrun. The project has a total budget of $1 million. The sponsor wants to minimize the contingency amount but also wants to avoid a high probability of exceeding the budget. What is the most appropriate contingency amount?

$50,000, the expected value of Risk A, because it has the higher probability.

$100,000, the sum of expected values ($50,000 + $50,000).

$0, because the probabilities are low and the project can absorb the risk.

$500,000, the full impact of Risk B, to be safe.

What is the purpose of allocating contingency funds to specific risks or work packages?

To reduce the overall project budget by eliminating the need for management reserves

To provide a single pool of funds that can be used for any project overrun

To track actual expenditures against the budget

To ensure that contingency funds are available where they are most likely needed and align with the risk management plan

A project manager is developing a spend tracking plan for a 12-month project with a budget of $1.2 million. The finance department requires monthly reports, but the project sponsor wants to know about any cost overrun within two weeks. The project team has a mix of internal and external resources. What is the most appropriate spend tracking approach?

Track actual expenditures only when invoices are received, and report quarterly.

Track actual expenditures monthly and report only at the end of the project.

Track actual expenditures weekly, compare to the budget monthly, and report variances to the sponsor within two weeks.

Track actual expenditures daily and report to the sponsor immediately for any deviation.

Which tool or technique is commonly used to quantify risks for contingency reserve estimation?

Expected monetary value (EMV) analysis

What is the purpose of a financial reporting plan?

To define the content, format, audience, and schedule for financial reports to stakeholders

To quantify risks and determine contingency reserves

To monitor actual expenditures against the budget

To allocate contingency funds to specific work packages

Project Management Professional (PMP)

Domain 2Objective 6

Task 6 Plan and Manage Finance PMP Practice Questions (Page 2)

Part of the Process domain, which accounts for 41% of the PMP exam. PMI does not publish an official question count, but from its 230-minute exam (~90–155 total, ~37–64 in this domain), expect 4–6 from this objective — we provide 32 practice questions to prepare you well beyond it. (estimate)

32questions here

7free pages

9concepts

41%of the exam

Questions 6–10

6expert · hard
A project manager is quantifying contingency for a project with two risks: Risk A has a 50% probability of causing a $100,000 cost overrun, and Risk B has a 10% probability of causing a $500,000 cost overrun. The project has a total budget of $1 million. The sponsor wants to minimize the contingency amount but also wants to avoid a high probability of exceeding the budget. What is the most appropriate contingency amount?
Select an answer first
7foundation · easy
What is the purpose of allocating contingency funds to specific risks or work packages?
Select an answer first
8application · medium
A project manager is developing a spend tracking plan for a 12-month project with a budget of $1.2 million. The finance department requires monthly reports, but the project sponsor wants to know about any cost overrun within two weeks. The project team has a mix of internal and external resources. What is the most appropriate spend tracking approach?
Select an answer first
9foundation · easy
Which tool or technique is commonly used to quantify risks for contingency reserve estimation?
Select an answer first
10foundation · easy
What is the purpose of a financial reporting plan?
Select an answer first

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Task 6 Plan and Manage Finance PMP Practice Questions (Page 2)

Questions 6–10

What is the purpose of allocating contingency funds to specific risks or work packages?

Which tool or technique is commonly used to quantify risks for contingency reserve estimation?

What is the purpose of a financial reporting plan?

Keep studying — Process