You work as a Project Manager for Tech Perfect Inc. Several projects are running under your supervision. Martha, the team leader of a project, provides you performance indexes of her project. The cost variance (CV) of her project is -20. What does this figure depict?
A.
The project is behind schedule.
B.
Spending is right on target.
C.
Costs are lower than planned.
D.
Costs are higher than planned.
Explanation:
According to the question, the cost variance of the project is -20, which is a negative figure. The negative CV depicts that the costs are higher than planned.
What is CV?
Cost variance (CV) is a measure of cost performance on a project. The variance notifies if costs are higher than budgeted or lower than budgeted. The cost variance is calculated based on the following formula:
CV = Earned Value (EV) – Actual Cost (AC)
A positive value means that spending is less than budgeted, whereas a negative value indicates that costs are higher than originally planned for the project. Answer option C is incorrect. This result is drawn when the CV value is positive. Answer option B is incorrect. If the CV is zero, it shows that spending is right on target. Answer option A is incorrect. This result is depicted by viewing the schedule variance (SV), not the CV.
What is SV?
Schedule variance (SV) is a measure of schedule performance on a project. The variance notifies that the schedule is ahead or behind what was planned for this period in time. The schedule variance is calculated based on the following formula:
SV = Earned Value (EV) – Planned Value (PV)
If the resulting schedule is negative, it indicates that the project is behind schedule. A value greater than 0 shows that the project is ahead of the planned schedule. A value of 0 indicates that the project is right on target.