Variance Analysis

Correct Answer: The project's progress is over budget but ahead of schedule

To understand the project's progress using the given figures, we can use two project management metrics: the Cost Performance Index (CPI) and the Schedule Performance Index (SPI). I'll explain these using formulas in plain text. 1. CPI helps us evaluate how well the project is sticking to its budget. It's calculated as EV / AC. Here, EV (Earned Value) is $40,000 and AC (Actual Cost) is $50,000. Plugging in the values, we get 40,000 / 50,000, which equals 0.8. A CPI less than 1 indicates the project is over budget. 2. SPI tells us how well the project is adhering to its schedule. It's calculated as EV / PV. In this case, PV (Planned Value) is $30,000. So, the calculation is 40,000 / 30,000, resulting in 1.33. An SPI greater than 1 means the project is ahead of schedule. Based on these calculations: - The CPI of 0.8 (less than 1) indicates the project is over budget since the actual cost is more than the earned value. - The SPI of 1.33 (greater than 1) shows the project is ahead of schedule because the earned value is more than the planned value. Thus, the project's progress signifies that it is over budget but ahead of schedule.

Correct Answer: cost

The correct answer is cost variance. When comparing actual cost with earned value (EV) during a project, the result shows a cost variance. Earned value is a measure of the value of work performed so far. By comparing this value to the actual cost incurred, we can determine whether the project is over or under budget. This is known as cost variance. Scope variance would involve comparing the project deliverables to the original requirements. Quality variance would compare the quality of the work to the expected standards. Schedule variance compares the earned value to the planned value to determine if the project is ahead or behind schedule. While these are all important project metrics, they do not directly result from comparing actual cost to earned value.

Correct Answer: Alan needs to investigate why the project is costing more than planned and take necessary corrective action.

The best step for Alan, the project manager, in this situation is to figure out why the project is costing more than planned and take required corrective action. This may involve investigating any unexpected costs, possible cost overruns, or any other factors that may be contributing to the increased costs. The other answers are not the best approaches. Stopping the project abruptly due to a cost increase might be a hasty decision and doesn't address the underlying issue. Continuing just as planned without identifying and addressing the cause of the cost increase is also not a wise move. Projects do often have cost variances, but they need to be understood and managed proactively. Finally, asking for additional budget without first analyzing the cause of the cost variance isn't the right method because it does not address the source of the problem and could potentially make the situation worse if the root cause is not addressed.