Certified Supply Chain Professional (CSCP) Practice Exam

When a budget for a project is approved, it is referred to as what?

1. Cost baseline

2. Financial plan

3. Expense projection

4. Resource allocation

The correct answer is: Cost baseline

When a budget for a project is approved, it is referred to as a cost baseline. The cost baseline establishes the approved version of the project budget, which is used to measure and monitor project performance. It is a critical part of project management because it serves as a reference point for comparing actual expenditures against the budget as the project progresses. The cost baseline includes all authorized costs and is used to track variances throughout the project's life cycle. It helps project managers identify areas where spending may be exceeding the planned budget and allows for necessary corrections. By having a defined cost baseline, project teams can ensure accountability and maintain financial control over project activities. While other terms like financial plan, expense projection, and resource allocation may relate to budgeting and financial management, they do not specifically refer to the approved budget used as a benchmark for measuring performance against planned spending. The financial plan often encompasses broader financial strategies and considerations, while an expense projection estimates future costs without the same level of authorization as a cost baseline. Resource allocation pertains to the distribution of resources rather than the financial specifics associated with approved project budgets.