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Guide to Cost Variance in Earned Value Management

Cost Variance (CV) is a crucial concept in the Project Management Body of Knowledge (PMBOK) Guide Seventh Edition. Part of the Earned Value Management (EVM) system, it helps track a project's financial health.

Why is it Important?
CV is important as it provides a measure of budgetary performance. It forms an integral part of effectively controlling project costs and helps in making informed decisions regarding cost management strategy.

What is Cost Variance?
CV is a measure of the cost performance of a project. It is the difference between the earned value (EV) and the actual cost (AC). A positive CV indicates a favorable condition where the project is under budget. Conversely, a negative CV implies that the project is over budget.

How it Works?
CV = EV - AC. To calculate CV, subtract the project's actual cost from its earned value.

Exam Tips: Answering Questions on Cost Variance
– Always remember the formula: CV = EV - AC.
– Understand the implications of positive and negative CV.
– Apply the concept properly by practicing with different sets of numerical values.
– Illustrate your understanding of CV in the context of overall EVM.
Remember, questions linked to CV do not solely examine your calculation skills; they also analyze your overall understanding of cost control in project management.
Thus, mastering CV is not only essential for passing the examination but also for excelling as a proficient and knowledgeable project manager.

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Cost Variance practice test

Cost Variance (CV) refers to the difference between the earned value and the actual cost of a project at any given time. It is a crucial EVM tool that depicts whether a project is over or under budget. A positive CV signifies that the project is under budget, while a negative CV points to it being over budget. Maintaining suitable CVs helps project managers identify cost overruns, adjust budgets, and realign resources to ensure the project's smooth progress and the attainment of the objectives within the allocated funds.

Time: 5 minutes   Questions: 5

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Project Management Professional Preparation Package (2024)

  • Earn 35 PDUs needed for your PMP certification
  • 12955 Superior-grade Project Management Professional practice questions.
  • Accelerated Mastery: Deep dive into critical topics to fast-track your mastery.
  • Unlock Effortless PMP preparation: 5 full exams.
  • 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
  • Bonus: If you upgrade now you get upgraded access to all courses
  • Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!