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.