CSLB Contractor's Law & Business Practice Exam

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What is the primary purpose of a cost management system in construction?

To establish a timeline for project completion
To give a cost history for analyzing labor and material costs
To prepare bids for future jobs
To manage employee payroll

The correct answer is: To give a cost history for analyzing labor and material costs

The primary purpose of a cost management system in construction is to give a cost history for analyzing labor and material costs. By effectively tracking and analyzing past costs, a contractor can gain valuable insights into project expenses. This information is essential for making informed decisions, improving cost estimates for future projects, and identifying trends that may impact the overall budget. It allows for better forecasting and can help in identifying areas where costs can be controlled or reduced in future projects. While establishing a timeline for project completion, preparing bids, and managing payroll contribute to project management, they do not encompass the main function of a cost management system, which focuses specifically on analyzing historical financial data to inform planning and budgeting processes.