Which of the following shows a project that is presently over its financial budget?
A.
CPI = 1.4
B.
CPI = 0
C.
CV = +$11,000
D.
CPI = 0.8
Which of the following shows a project that is presently over its financial budget?
Which of the following shows a project that is presently over its financial budget?
Admin: The correct answer is C.
Cost Variance %
Cost Variance % indicates how much over or under budget the project is in terms of percentage.
Cost Variance % can be calculated using the following formula:
CV % = Cost Variance (CV) / Earned Value (EV)
OR
CV % = CV / BCWP
The formula mentioned above gives the variance in terms of percentage which will indicate how much less or more money has been used to complete the work as planned in terms of percentage.
Positive Variance % indicates % under Budget.
Negative Variance % indicates % over Budget.
Cost Performance Indicator (CPI)
Cost Performance Indicator is an index showing the efficiency of the utilization of the resources on the project. Cost Performance Indicator can be calculated using the following formula:
CPI = Earned Value (EV) / Actual Cost (AC)
OR
CPI = BCWP / ACWP
The formula mentioned above gives the efficiency of the utilization of the resources allocated to the project.
CPI value above 1 indicates efficiency in utilizing the resources allocated to the project is good.
CPI value below 1 indicates efficiency in utilizing the resources allocated to the project is not good.
Cost Variance (CV) is a very important factor to measure project performance. Cost Variance (CV) indicates how much over or under budget the project is.
Cost Variance can be calculated using the following formula:
Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC)
OR
Cost Variance (CV) = BCWP – ACWP
The formula mentioned above gives the variance in terms of cost which will indicate how less or more cost has been used to complete the work as of date.
Positive Cost Variance Indicates the project is under budget.
Negative Cost Variance Indicates the project is over budget
Admin: Second thought, none of the answers work. Please fix.
The correct answer is D! Because having a lower than 1 CPI negatively affects the EAC (estimate at completion).
EAC=BAC/CPI
If BAC=$10000 and CPI=0.8 then EAC=$12500; $2500 more than planed.
Hence you are over budget!
The answer is D
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