GMAT Focus EditionData InsightsEasy
A project manager is analyzing the budget allocation for a new software development project. The project is divided into three phases: Planning, Development, and Testing. The total budget for the project is $500,000. Based on historical data, the Planning phase typically consumes 20% of the total budget, the Development phase 60%, and the Testing phase the remaining 20%. If the actual cost for the Planning phase came in at $90,000 and the Development phase at $280,000, what is the maximum amount that can be spent on the Testing phase without exceeding the total project budget?
- A$130,000
- B$150,000
- C$180,000
- D$120,000
Show answer & explanationAnswer & explanation
Correct answer: A. $130,000
The total budget is $500,000. The actual costs for Planning and Development are $90,000 and $280,000, respectively. Summing these actual costs and subtracting from the total budget gives the remaining amount for Testing.
Why the other options are wrong
- B. This option might be chosen if there was an error in summing the actual costs or subtracting from the total.
- C. This option might be chosen if the budget for Testing was miscalculated or if only historical percentages were considered without actuals.
- D. This option might be chosen if the calculation for remaining budget was incorrect.
Budget Variance Analysis
Budget Variance Analysis is the process of comparing actual financial results to the budgeted or planned performance. It helps identify discrepancies and understand their causes.
- Compares actual vs. planned figures.
- Identifies overspending or underspending.
- Crucial for financial control and forecasting.
Memory trick: Keep your project budget in check, or your funds will wreck!