TOPIC: Free PMP® Exam Sample Question of the Week

Hello everyone! Here is this week's free PMP® exam sample question from the PM Exam Simulator.

The difference between the cost baseline and the project budget is defined as:

A. Contingency reserves
B. Funding requirements
C. Management reserves
D. Organizational process assets

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HINT: Which type of reserve is included in the cost baseline?

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Answer and Explanation:
The correct answer is C.

The total project budget includes the cost baseline plus the management reserves. Therefore, the difference between the two is the management reserves. Withheld for management control purposes, management reserves are used for unforeseen risks that affect the project. The cost baseline includes the work package estimates plus contingency reserves. The project manager can use contingency reserves for identified risks should they occur.

Details for Each Option:

A. Contingency reserves
Incorrect. Contingency reserves are allocated for identified risk and are included in the cost baseline. Therefore, this is an incorrect answer.

B. Funding requirements
Incorrect. A project is often funded in incremental amounts and may not be evenly distributed. The funding requirements specify when project funding will be required. The total funds required, or project budget, is the amount included in the cost baseline plus any management reserves. This question is not asking about funding. Therefore, this is not the correct answer.

C. Management reserves
Correct. The management reserves are used for unforeseen risks that may occur on the project and can be only be used at management's discretion. The total project budget is determined by adding the cost baseline and the management reserves making this the correct answer.

D. Organizational process assets
Incorrect. Organizational process assets are plans, processes, policies, procedures, and knowledge bases that are specific to and used by the performing organization. This question references a project budget. Therefore, this is an incorrect answer.

Reference: A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Sixth Edition, Project Management Institute Inc., 2017, Page(s) 254-255, 246