Certified Meeting Professional (CMP) Practice Exam

How should the budget be organized according to best practices?

1. Fixed and flexible costs

2. Direct, indirect, and miscellaneous costs

3. Fixed, variable, indirect costs

4. Historical, projected, and luxury costs

The correct answer is: Fixed, variable, indirect costs

Organizing the budget into fixed, variable, and indirect costs aligns well with best practices in event management. Fixed costs are those that remain constant regardless of the number of attendees or services utilized, such as venue rental fees and insurance. Variable costs fluctuate based on the scale of the event, which can include catering and materials that change with the number of participants. Indirect costs, often referred to as overhead costs, encompass expenses that are not directly tied to the event itself but are necessary for its execution, such as administrative fees. This categorization facilitates a clearer understanding of how resources are allocated, enables effective forecasting, and assists in identifying areas where adjustments can be made if necessary. It also helps in managing financial risk by ensuring that the planning team has considered all expense types, leading to more accurate and realistic budget creation and monitoring throughout the planning process.