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Cost Estimating PMP Practice Questions

Test yourself with 7 free, scenario-based PMP practice questions on cost estimating, drawn from the Process domain of the exam and aligned to PMBOK 8. Work through each scenario before revealing the answer — every question includes an explanation of why the correct choice is right. For randomized, interactive practice across all topics, use the practice question tool.

Question 1 of 7

A project manager is asked to provide a rough order-of-magnitude (ROM) estimate for a new project with very limited information. Which estimating technique is MOST appropriate?

  1. A.Analogous estimating — use actual cost data from a similar past project as the basis
  2. B.Bottom-up estimating — estimate each work package and roll up to a total
  3. C.Three-point estimating — develop optimistic, pessimistic, and most likely estimates
  4. D.Parametric estimating — use a statistical model based on project parameters
Show answer and explanation

Correct answer: A

When project information is limited (early in initiation), analogous estimating uses historical data from similar completed projects to produce a high-level estimate quickly. ROM estimates typically range from -25% to +75% accuracy. Bottom-up requires detailed WBS decomposition — not possible with limited information. Three-point and parametric estimating require more project detail and validated parameters. Analogous estimating is fast, cheap, and appropriate for early-stage estimates.

Question 2 of 7

A project manager is using three-point (PERT) estimating for a critical activity. The optimistic estimate is 4 days, the pessimistic estimate is 16 days, and the most likely estimate is 7 days. What is the PERT expected duration?

  1. A.7 days — the most likely estimate
  2. B.8 days — the simple average of the three estimates
  3. C.9 days — the PERT weighted average
  4. D.11 days — weighted toward the pessimistic estimate
Show answer and explanation

Correct answer: B

PERT Expected Duration = (O + 4M + P) / 6 = (4 + 4×7 + 16) / 6 = (4 + 28 + 16) / 6 = 48 / 6 = 8 days. Wait — let me recalculate: (4 + 28 + 16) / 6 = 48/6 = 8. The correct answer is 8 days. The PERT formula weights the most likely estimate four times more than the optimistic and pessimistic estimates, reflecting that the most likely outcome is the best single predictor. Standard deviation = (P - O) / 6 = (16 - 4) / 6 = 2 days, giving a 68% confidence range of 6 to 10 days.

Question 3 of 7

A project manager is estimating a software project. The organization has collected historical data showing that software projects of this type cost approximately $15,000 per function point, and the proposed system has an estimated 120 function points. What estimating technique is being used and what is the estimate?

  1. A.Analogous estimating; estimate = $1,800,000
  2. B.Bottom-up estimating; estimate = $1,800,000
  3. C.Parametric estimating; estimate = $1,800,000
  4. D.Three-point estimating; estimate = $1,800,000
Show answer and explanation

Correct answer: C

Parametric estimating uses a statistical relationship between historical data and project parameters (cost per unit) to calculate estimates. Here: 120 function points × $15,000/function point = $1,800,000. Parametric estimating is more accurate than analogous because it scales to the specific project size. It requires a validated cost model and reliable historical data. Analogous estimating uses the total cost of a past project, not a per-unit rate. Bottom-up estimates from detailed WBS components. Both A and B use historical data, but the unit-rate calculation distinguishes parametric.

Question 4 of 7

A project manager needs the most accurate cost estimate possible. The WBS has been fully developed and the team can estimate each work package. Which technique should be used?

  1. A.Analogous estimating — it is the fastest approach
  2. B.Parametric estimating — it uses reliable historical data
  3. C.Expert judgment — the most experienced team member should estimate the total
  4. D.Bottom-up estimating — it aggregates individual work package estimates for maximum accuracy
Show answer and explanation

Correct answer: D

Bottom-up estimating is the most accurate cost estimating technique because it estimates each individual work package (sometimes to the activity level) and aggregates them into the project total. Its accuracy of -5% to +10% is significantly better than analogous (-25% to +75%) or ROM estimates. The trade-off is that it requires significant time and a complete WBS. Given that the WBS is fully developed, bottom-up is both feasible and appropriate when accuracy is the priority.

Question 5 of 7

A software development activity has these three-point estimates: Optimistic = $10,000, Most Likely = $14,000, Pessimistic = $24,000. What is the PERT estimate and the standard deviation?

  1. A.PERT = $15,000; Standard Deviation = $2,333
  2. B.PERT = $14,000; Standard Deviation = $14,000
  3. C.PERT = $16,000; Standard Deviation = $2,333
  4. D.PERT = $16,000; Standard Deviation = $4,667
Show answer and explanation

Correct answer: A

PERT = (O + 4M + P) / 6 = ($10,000 + 4×$14,000 + $24,000) / 6 = ($10,000 + $56,000 + $24,000) / 6 = $90,000 / 6 = $15,000. Standard Deviation = (P - O) / 6 = ($24,000 - $10,000) / 6 = $14,000 / 6 = $2,333. Therefore PERT = $15,000 and SD = $2,333. The 68% confidence range is $15,000 ± $2,333 = $12,667 to $17,333. These calculations are essential for activity-level risk quantification and schedule/cost contingency planning.

Question 6 of 7

On a hybrid project, the predictive design phase has a detailed bottom-up estimate of $280,000. The agile delivery phase has an analogous estimate of $450,000 (±30%). What is the overall project estimate range?

  1. A.$730,000 (single-point estimate)
  2. B.Between $595,000 and $865,000, reflecting the uncertainty in the agile phase estimate
  3. C.Between $455,000 and $730,000 since only the design phase is estimated accurately
  4. D.The estimate cannot be provided until the agile phase is fully planned
Show answer and explanation

Correct answer: B

The design phase is accurately estimated at $280,000. The agile phase has a ±30% range on $450,000: low = $450,000 × 0.70 = $315,000; high = $450,000 × 1.30 = $585,000. Total range: $280,000 + $315,000 = $595,000 (low) to $280,000 + $585,000 = $865,000 (high). Presenting a range rather than a point estimate is more honest and useful when uncertainty exists. Refusing to estimate prevents planning. The range should be communicated clearly with its basis and confidence level.

Question 7 of 7

An agile team uses relative sizing with a Fibonacci sequence (1, 2, 3, 5, 8, 13, 21) for story points. A new story is described as 'similar to the 5-point story we did last sprint but with an additional integration component we've never built before.' What estimate is MOST appropriate?

  1. A.13 points — the unknown integration component adds significant uncertainty and complexity
  2. B.5 points — the story is comparable to the previous integration story, and consistent sizing across similar items maintains the accuracy of the team's historical velocity baseline.
  3. C.8 points — the unknown component adds only a modest layer of uncertainty above the known base complexity, making a moderate size increase sufficient to account for the additional ambiguity.
  4. D.21 points — any story containing an unknown component should automatically receive the highest Fibonacci value to force full investigation and resolution before it can enter a sprint.
Show answer and explanation

Correct answer: A

The Fibonacci sequence's non-linear nature communicates increasing uncertainty at larger sizes. An unknown integration component — something the team has never built — introduces both complexity and uncertainty beyond what a 5→8 increment captures. The team should ask: Is this significantly more complex than an 8? If the integration is genuinely unknown, 13 better represents the combined familiar base (5-point similar work) plus an uncharted component. In Planning Poker, uncertainty warrants a spike before estimating, or a larger estimate to cover the unknown.

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