Cost Control

Correct Answer: Cost Variance (CV)

When the actual costs of a project exceed its planned costs, the metric that can help isolate the cause of the variance is Cost Variance (CV). Cost Variance (CV) is a measure of cost performance on a project. It is the difference between the Earned Value (EV) and the Actual Cost (AC). CV tells you how much over or under budget you are at a point in time. - CV = EV - AC A negative CV indicates that the project is over budget, which seems to be the case in this scenario. By examining the Cost Variance, you can identify how much the project is over budget and start investigating the specific areas where costs are higher than expected. Answer: Cost Variance (CV).

Correct Answer: Review the project scope and identify areas where costs can be optimized without compromising deliverables.

The best course of action for the project manager is to review the project scope and identify areas where costs can be optimized without compromising deliverables. This approach allows for a targeted cost optimization strategy while maintaining the project's quality and objectives. Implementing change control procedures without assessing the current scope may lead to unnecessary restrictions. Reducing the team size without evaluating the impact on the project timeline can disrupt project progress. Seeking additional funding without analyzing the root causes does not address the underlying issues causing the cost overrun.

Correct Answer: The initial cost estimates may have been too high, leading to inefficient resource allocation.

The best answer is that the initial cost estimates may have been too high, leading to inefficient resource allocation. A Cost Performance Index (CPI) above 1.0 indicates that the project is spending less money than planned for the work completed. When the CPI is consistently above 1.5, it suggests a significant discrepancy between the planned and actual costs. This situation raises concerns about the accuracy of the initial cost estimates. If estimates were too high, it could lead to inefficient resource allocation, as more resources might have been assigned than necessary. This can result in wasted resources and missed opportunities for optimization. The other options are less likely or less critical: 1. Cutting corners on quality: While possible, a high CPI doesn't necessarily indicate quality issues. It's an assumption not directly supported by the CPI data alone. 2. Errors in the financial reporting system: While this could be a possibility, it's less likely to consistently produce a high CPI over time. Systematic errors would typically be identified and corrected. 3. Reduced project scope: Scope reduction could contribute to cost savings, but it wouldn't typically result in such a high CPI consistently. Moreover, significant scope changes would generally be documented and communicated separately from CPI calculations. As a project manager, the primary concern should be understanding why the actual costs are significantly lower than estimated and ensuring that this discrepancy doesn't negatively impact the project's overall success or future planning efforts.