Variance Analysis

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

Cost Performance Index, or CPI, helps us understand how well the project is sticking to its budget. It's calculated by dividing the Earned Value (EV) by the Actual Cost (AC). Here, the Earned Value is $30,000 and the Actual Cost is $40,000. So, when we do the division, 30,000 divided by 40,000, we get a value less than 1, which tells us the project is spending more money than it's earning. This means the project is over budget. Schedule Performance Index, or SPI, is about the project's timing. It's found by dividing the Earned Value (EV) by the Planned Value (PV). The Planned Value is $20,000 in this case. So, with the Earned Value being $30,000, we divide 30,000 by 20,000 and get a value greater than 1. This indicates that the project has completed more work than was originally planned for this stage, so it's ahead of schedule. Combining these insights, the project is over budget because it's spending more than it's earning, but it's also ahead of schedule because it has completed more work than planned at this point.

Correct Answer: The project is under budget and behind on schedule

Given the figures: - Actual Cost (AC) = $100,000 - Earned Value (EV) = $200,000 - Planned Value (PV) = $300,000 We can determine the project's status in terms of budget and schedule by looking at the Cost Variance (CV) and Schedule Variance (SV). Cost Variance (CV) is given by EV - AC. Here, it's $200,000 - $100,000 = $100,000. Since CV is positive, the project is under budget, meaning it has spent less than what was planned for the work performed so far. Schedule Variance (SV) is given by EV - PV. Here, it's $200,000 - $300,000 = -$100,000. Since SV is negative, the project is behind on schedule, meaning less work has been completed than was planned by this point in time. So, the project is under budget because it has spent less than expected for the work completed, and it is behind on schedule because the value of the work completed is less than what was planned to be completed by now. Therefore, the correct response is "The project is under budget and behind on schedule."

Correct Answer: The project is over-budget but ahead of schedule.

The project is over-budget but ahead of schedule. This is because the actual cost ($10,000) is greater than the planned value ($7,000), indicating that the project is over-budget. Furthermore, the earned value ($8,000) is greater than the planned value ($7,000), suggesting that the project is ahead of schedule. The other answers are incorrect because they either suggest the project is under-budget (which it's not, as the actual cost is more than planned), behind schedule (which it's not, as the earned value is more than the planned value), or proceeding as planned (which it's not, as both the cost and schedule deviate from the plan).