AACE EVP: Perform Budgeting Duties

Use this focused AACE EVP page to drill Perform Budgeting Duties decisions before returning to mixed practice, timed mocks, and the full PM Mastery question bank.

Topic snapshot

Sample questions

These questions are original PM Mastery practice items aligned to this topic area. They are designed for self-assessment and are not official exam questions.

Question 1

Topic: Perform Budgeting Duties

At the 30 June status date, a control account manager is preparing the earned value report for a material work package. The approved performance measurement baseline budgets 100 units at $4,000 per accepted unit. The work package uses a units-complete earned value technique based on site acceptance. By cutoff, 40 units have been accepted. The accounting procedure for actual cost in earned value reports uses posted invoice cost plus approved accruals for accepted work at the cutoff date.

Current records show:

• Purchase order commitment: $460,000
• Posted supplier invoices for accepted units: $150,000
• Approved accrual for accepted work not yet invoiced: $25,000
• Cash paid to supplier: $90,000

What is the best professional action for the 30 June earned value report?

• A. Report earned value of $160,000 and actual cost of $175,000, with the remaining commitment shown separately from performance cost.
• B. Report earned value of $175,000 and actual cost of $460,000 because accruals indicate progress and the committed purchase order is the expected final cost.
• C. Report earned value of $460,000 and actual cost of $90,000 because the purchase order is committed and only part of it has been paid.
• D. Report no earned value or actual cost until the supplier has been fully paid, because cash payment is the only auditable cost event.

Best answer: A

What this tests: Perform Budgeting Duties

Explanation: Earned value for this work package is based on the approved budget for the work objectively accomplished, not on the supplier’s invoices, commitments, or cash payments. Since 40 accepted units have a budgeted value of $4,000 each, earned value is $160,000. Actual cost is determined by the stated accounting procedure: posted invoice cost plus approved accruals for accepted work at the cutoff date, or $150,000 + $25,000 = $175,000. The purchase order commitment is useful for funding, procurement exposure, and forecast analysis, but it is not earned progress or actual cost under the stated rule. Cash paid is also not the correct actual cost basis when accrual accounting is required for the EVMS report.

Earned value is the budgeted value of accepted work, while actual cost follows the accounting cutoff basis of posted invoices plus accruals.

Question 2

Topic: Perform Budgeting Duties

At the June status date, a control account manager wants to revise an approved control account plan. The proposal would move $150,000 of budget from a test work package to a design work package, slip two baseline milestones by one month, and change the earned value technique from 0/100 to percent complete. The project change procedure states that changes to control account budget, baseline schedule dates, or measurement technique require a baseline change request approved by the project change control board; changes affecting the contractual reporting baseline also require customer authorization. No change order has been approved. What is the best professional action?

• A. Keep the approved baseline unchanged for the current report, document the variance, and submit a baseline change request with impact analysis for the required approvals.
• B. Move the budget and rephase the milestones as a forecast update without processing a baseline change request.
• C. Allow the control account manager to make the changes because the total control account budget remains unchanged.
• D. Change the earned value technique now and defer the budget and schedule changes until the customer approves them.

Best answer: A

What this tests: Perform Budgeting Duties

Explanation: An earned value baseline is controlled by authorization, not by convenience or the desire to reduce a variance. Moving budget between work packages, changing baseline milestone dates, or changing the earned value measurement technique affects the performance measurement baseline and the basis for reported performance. Because the project procedure requires change control board approval, the appropriate path is to keep the approved baseline intact, report current performance against it, and submit a baseline change request with the supporting impact analysis. If the change affects the contractual reporting baseline, customer authorization is also required before implementation. Forecasts such as ETC or EAC may be updated to reflect current expectations, but forecast updates do not revise the authorized baseline.

Baseline budget, schedule dates, and earned value technique should not be changed until the required change-control approvals are obtained.

Question 3

Topic: Perform Budgeting Duties

A control account manager is preparing the March 31 earned value report. The approved performance measurement baseline for the control account has these time-phased budget increments:

Constraints:

• The March 31 status date is the reporting cutoff.
• A $80,000 scope change has been submitted but is not yet approved.
• Some April work was started early, but the baseline has not been formally rephased.

What is the best planned value judgment for the March 31 report?

• A. Report cumulative planned value as the actual cost recorded through March 31.
• B. Report cumulative planned value as $530,000 by adding the pending $80,000 change to the March baseline.
• C. Report cumulative planned value as $450,000 based on the approved baseline through March 31.
• D. Report cumulative planned value as $600,000 because April work has already started early.

Best answer: C

What this tests: Perform Budgeting Duties

Explanation: Planned value is taken from the approved, time-phased performance measurement baseline as of the status date. For a March 31 report, the relevant baseline budget is the cumulative budget planned for January, February, and March: $100,000 + $150,000 + $200,000 = $450,000. Pending changes are not added to planned value until they are approved and incorporated into the baseline. Early execution of April work may affect earned value if objective accomplishment criteria are met, and it may affect actual cost, but it does not move April planned value into March unless the baseline is formally rephased under change control.

Planned value is the authorized time-phased budget scheduled to be performed by the status date, so January through March totals $450,000.

Question 4

Topic: Perform Budgeting Duties

At the 30 June status date, a project uses the rule \(\text{contract budget base (CBB)} = \text{performance measurement baseline (PMB)} + \text{management reserve (MR)}\). Contingency inside a control account may be applied only to the identified risk documented for that control account. MR is outside the PMB and may be allocated only by documented management action; it is not used to erase current-period cost variance.

Current budget position before reserve actions:

Status evidence:

• An identified supplier-delay risk in control account CA-220 occurred; the risk register and control-account plan include $75,000 contingency for this risk.
• A customer-approved scope change adds $200,000 of authorized budget, to be held in undistributed budget until detail planning is complete.
• CA-410 has a $60,000 unfavorable cost variance from lower productivity; no baseline change, risk drawdown, or management action has been approved for it.

Which reserve decision is supported at the 30 June status date?

• A. Hold the approved $200,000 scope change outside the CBB until costs are incurred, and use MR for the $60,000 variance.
• B. Apply the $75,000 CA-220 contingency to the affected work package, add $200,000 to undistributed budget, and leave MR at $600,000.
• C. Reduce MR to $265,000 by funding the $75,000 risk, $200,000 scope change, and $60,000 variance from MR.
• D. Apply $135,000 of CA-220 contingency for the supplier-delay risk and CA-410 productivity variance, and add $200,000 to MR.

Best answer: B

What this tests: Perform Budgeting Duties

Explanation: Reserve decisions must be traceable to the type of budget and the authorization basis. The $75,000 is supported because it is contingency already tied to an identified risk in CA-220, so it can be applied within that control account. The $200,000 customer-approved scope change is authorized budget and should increase the CBB and PMB, typically through undistributed budget until detailed planning assigns it. MR remains $600,000 because no documented management action authorizes an MR draw, and the $60,000 productivity overrun is a performance variance, not a reserve justification by itself. After the supported action, the PMB becomes $8,900,000 and CBB becomes $9,500,000, while MR remains unchanged.

The identified risk and approved scope change support the contingency use and PMB increase, while the productivity variance has no approved reserve action.

Question 5

Topic: Perform Budgeting Duties

A project controls lead is reviewing the proposed performance measurement baseline for an authorized control account before baseline approval. The project manager wants monthly variance analysis and a credible estimate at completion.

Which baseline structure should be approved?

• A. Create separate work packages for design, procurement, and install/test; time-phase each budget to planned accomplishment and earn value from accepted deliverables, received valves, and tested units.
• B. Combine all work into one level-of-effort work package spread evenly from January through June and earn value based on elapsed time.
• C. Place the full control account budget in March procurement and earn value when purchase orders are issued, then explain installation performance in narrative reports.
• D. Hold the install/test budget outside the baseline until field work starts, then add it after actual costs are available.

Best answer: A

What this tests: Perform Budgeting Duties

Explanation: A sound performance measurement baseline decomposes authorized work into measurable work packages, time-phases the budget according to the planned work sequence, and defines how earned value will be credited from objective accomplishment. In this case, the work is defined and has clear evidence points: accepted drawings, received valves, and installed/tested units. Separating design, procurement, and installation/testing supports meaningful planned value, earned value, actual cost comparison, variance analysis, and forecast-at-completion reasoning. Combining discrete work into level of effort or earning value from purchase orders would weaken performance visibility. Delaying defined authorized scope outside the baseline until actual costs are known would also undermine baseline integrity.

This structure aligns authorized scope, budget phasing, and objective accomplishment evidence so EV, variances, and EAC can be analyzed by work package.

Question 6

Topic: Perform Budgeting Duties

An EV analyst reviews the budget basis before issuing the monthly EAC and VAC summary. The control account progress and actual costs have already been validated.

Report settings: EV = $450,000, AC = $510,000, CPI = EV / AC, and EAC = BAC / CPI. The report uses BAC = $970,000.

Which classification error should be corrected before management interprets the forecast?

• A. Actual costs are reported separately from the budget element summary.
• B. Management reserve is being treated as part of BAC for the CPI-based EAC and VAC.
• C. Control account contingency is being treated as budget for authorized work.
• D. Subcontract budget is separated from direct labor and direct material budget.

Best answer: B

What this tests: Perform Budgeting Duties

Explanation: In earned value budgeting, the performance measurement baseline and BAC should represent authorized work scope budget. A contingency amount that has been authorized within a control account for identified scope risk can be part of that baseline. Management reserve is different: it is held outside control accounts for future authorized changes or unknowns and should not be included in BAC, EV, CPI-based EAC, or VAC calculations until it is formally released through change control. Here, the authorized control account budget totals $900,000, but the report uses $970,000 by adding $70,000 of management reserve. That classification can make the forecast and variance appear less severe or otherwise misleading because reserve is being mixed with performance budget.

Management reserve is outside the performance measurement baseline until formally released, so including it in BAC can distort forecast and variance interpretation.

Question 7

Topic: Perform Budgeting Duties

At the September status review, a project controls manager proposes changing next month’s baseline report based on the following snapshot. The program procedure states that an over-target baseline or over-target schedule may be implemented only after formal customer approval, and prior-period performance history must be retained unless that approval specifically authorizes a reset.

Which interpretation should be used for the management report?

• A. Reset cumulative variances to zero because the forecast exceeds the contract budget base and baseline finish date.
• B. Move $18.0M into undistributed budget because the EAC exceeds the contract budget base.
• C. Release the $6.0M management reserve to eliminate the need for an over-target baseline.
• D. Report a potential OTB/OTS condition, continue measuring against the approved baseline, and state that implementation awaits formal customer approval.

Best answer: D

What this tests: Perform Budgeting Duties

Explanation: An over-target baseline or over-target schedule is a controlled baseline action, not an automatic result of an unfavorable forecast. The data support a serious condition: EAC of $118.0M exceeds the $100.0M contract budget base, and the forecast finish is four months beyond the approved baseline finish. However, the exhibit also states that the customer has only requested an impact assessment and has not approved the OTB/OTS. Until approval is issued, management reporting should continue to use the approved performance measurement baseline and disclose the forecast condition, variance position, schedule slip, and approval status. Undistributed budget, management reserve, and variance resets cannot be used simply to absorb poor performance or make reports look current.

The exhibit shows a forecast overrun and finish slip, but the OTB/OTS has not been approved for baseline implementation.

Question 8

Topic: Perform Budgeting Duties

At the June 30 status date, a control account has a baseline budget at completion of $900,000. Its reported earned-value data are:

The formula is \(CV = EV - AC\). The control account also contains $40,000 of contingency for a supplier retest risk that has not occurred. The project has $120,000 of management reserve outside the performance measurement baseline. A customer-requested interface change estimated at $70,000 is still pending authorization. The control account manager proposes moving $135,000 from reserve into the control account this month so the cost variance reports as zero and using part of the transfer to start the interface work.

Which assessment is most appropriate?

• A. The proposal is proper if the transfer is recorded as a baseline change before the June 30 customer report is issued.
• B. The proposal is improper only for the $70,000 interface work; the remaining $65,000 may be transferred to eliminate the cost variance.
• C. The proposal is proper because total available reserve of $160,000 is greater than the $135,000 unfavorable cost variance.
• D. The proposal is improper because the $135,000 transfer equals the unfavorable cost variance and would mask performance while also funding unauthorized scope.

Best answer: D

What this tests: Perform Budgeting Duties

Explanation: Reserve control protects the integrity of the performance measurement baseline. The control account has earned $450,000 of value and incurred $585,000 of actual cost, so the cost variance is -$135,000. Moving exactly $135,000 from contingency or management reserve to make the variance disappear would not reflect improved performance; it would hide an unfavorable cost condition. The contingency is tied to a supplier retest risk that has not occurred, so releasing it for unrelated overrun coverage is not supportable. Management reserve is outside the performance measurement baseline and is not a tool for retroactively improving reported cost performance. The pending interface change is also not authorized, so reserve should not be used to begin that scope. The proper control response is to report the variance, analyze cause and corrective action, and process any scope change through authorization before budget is added.

The current cost variance is $450,000 - $585,000 = -$135,000, and reserve should not be used to erase that variance or start unapproved scope.

Question 9

Topic: Perform Budgeting Duties

A control account manager is preparing the cost-element budget for an EVMS baseline as of the baseline freeze date. The company’s budgeting rule says direct costs are costs specifically traceable to the control account; indirect costs and overhead are budgeted separately through approved rates; management reserve is outside the performance measurement baseline.

Planned amounts for the control account are:

• Direct labor: $420,000
• Engineered material issued to this scope: $260,000
• Fixed-price fabrication subcontract: $180,000
• Dedicated rented crane for this scope: $40,000
• Site security charged through the indirect cost pool: $25,000
• Corporate overhead applied at 12% of direct labor: $50,400
• Contingency for identified package risks: $30,000
• Management reserve held by the project manager: $70,000

Which classification and amount best supports the earned value budget structure?

• A. Classify $900,000 as direct cost; treat site security and corporate overhead as indirect/overhead, and keep contingency and management reserve as reserve-type budget.
• B. Classify $955,000 as direct cost because site security and contingency both support the work package.
• C. Classify $1,075,400 as direct cost because all listed amounts are part of the total project budget authority.
• D. Classify $950,400 as direct cost because overhead is required to perform the control account work.

Best answer: A

What this tests: Perform Budgeting Duties

Explanation: For earned value budgeting, cost elements should be classified based on traceability and control. Direct labor, material issued to the scope, a subcontract for the scope, and dedicated equipment are direct costs because they can be specifically assigned to the control account. Site security is charged through an indirect pool, so it is not a direct control account cost. Corporate overhead is an overhead application, not a labor, material, subcontract, or equipment cost element. Contingency and management reserve are reserve-related budget categories; management reserve is explicitly outside the performance measurement baseline under the stated rule. The professional point is to preserve the integrity of the EVMS budget structure rather than inflate direct costs with indirect charges or reserves.

The direct cost amount is the sum of labor, material, subcontract, and dedicated equipment: $420,000 + $260,000 + $180,000 + $40,000 = $900,000.

Question 10

Topic: Perform Budgeting Duties

A control account in the approved performance measurement baseline has the following time-phased budget. The status date for the monthly earned value report is April 30. Use planned value (PV) as the cumulative baseline budget for work scheduled to be performed through the status date.

At April 30, earned value is USD 100,000 and actual cost is USD 125,000. Which reporting statement correctly interprets planned value for the control account?

• A. PV is USD 150,000; it represents the total approved control account budget including May.
• B. PV is USD 125,000; it represents the accounting cost recorded for the work by April 30.
• C. PV is USD 100,000; it represents the value of the work physically accomplished by April 30.
• D. PV is USD 115,000; it represents the approved budget for work scheduled through April 30, not the work actually earned or spent.

Best answer: D

What this tests: Perform Budgeting Duties

Explanation: Planned value is taken from the approved, time-phased performance measurement baseline. For a status date of April 30, the correct cumulative PV includes January through April only: USD 20,000 + USD 30,000 + USD 25,000 + USD 40,000 = USD 115,000. PV does not change because the team earned a different amount of work or incurred a different actual cost. Earned value reflects accomplished work measured against its budget, while actual cost reflects recorded cost. The May budget remains part of the control account BAC, but it is not planned value at the April status date because it is scheduled after the reporting cutoff.

The cumulative baseline budget through April is USD 20,000 + USD 30,000 + USD 25,000 + USD 40,000 = USD 115,000.

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Related focused pages

• Free AACE EVP Full-Length Practice Exam
• AACE EVP: Organizing
• AACE EVP: Communication Competency
• AACE EVP: Perform Planning and Scheduling Duties
• AACE EVP: Account Considerations
• AACE EVP: Analysis and Management Reports
• AACE EVP: Revisions and Data Maintenance

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