RCDD · Question #162
At the end of the third week of a project, the actual cost of work performed is $7000 USd and the budgeted cost of work performed is $8000 USd. Which of the following is true?
The correct answer is A. The project is under budget.. Earned Value Management uses Cost Variance (EV minus AC) to determine whether a project is over or under budget.
Question
At the end of the third week of a project, the actual cost of work performed is $7000 USd and the budgeted cost of work performed is $8000 USd. Which of the following is true?
Options
- AThe project is under budget.
- BThe project is budget incorrect.
- CThe project has been back-end loaded.
- DThe project is over budget.
How the community answered
(32 responses)- A84% (27)
- B3% (1)
- C9% (3)
- D3% (1)
Why each option
Earned Value Management uses Cost Variance (EV minus AC) to determine whether a project is over or under budget.
Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC) = $8000 - $7000 = +$1000. A positive CV indicates the project accomplished the planned work for less money than budgeted, meaning the project is under budget. This is a core EVM cost performance metric.
'Budget incorrect' is not a valid EVM status designation; cost variance is a precise numerical result, not a qualitative judgment about budgeting errors.
Back-end loading refers to scheduling more work or cost toward the end of a project timeline, which cannot be determined from a single-point cost variance snapshot.
Over budget requires a negative CV where AC exceeds EV; here AC ($7000) is less than EV ($8000), producing a positive variance indicating the opposite.
Concept tested: EVM cost variance calculation and interpretation
Source: https://www.pmi.org/learning/library/earned-value-management-systems-analysis-8026
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