If a project has a Cost Variance (CV) of 1000 and a Schedule Variance (SV) of -1000, what does it mean?
A. The project is under budget and behind schedule.
B. The project is over budget and ahead of schedule.
C. It is impossible to have a negative SV.
D. The Overall Variance (OV) is 0.
Answer: A. The project is under budget and behind schedule.
For both Cost Variance (CV) and Schedule Variance (SV), if the number is positive, then it is good. Conversely, if the number is negative, then it is bad. So CV of 1000 is good (under budget), while SV of -1000 is bad (behind schedule). There is no such thing as Overall Variance (OV).
If the BAC is 1000, the EAC is 1200, and the ETC is 900, what is the VAC?
Answer: A. -200
The VAC (variance at completion) is just a matter of figuring out delta between how much you thought you were going to spend before the project started, the budget at completion (BAC), and how much you think the project is going to cost knowing what you know today, the estimate at completion (EAC). So in this example, the VAC is -200, since VAC = BAC – EAC. That means the project is expected to cost $200 more than originally planned.
If the EAC is 2000, the PV is 500, and the AC is 400, what is the ETC?
Answer: C. 1600
The ETC (estimate to complete) is actually quite simple. Just figure out take the EAC (estimate at completion) and subtract the AC (actual cost), or ETC = EAC-AC; the PV is irrelevant for the ETC. What you are doing is looking at the difference between the updated estimate on how much the project will cost, EAC, and how much you have already spent, AC. The result is how much more you expect to spend to complete the project, EAC.
If the BAC is 1000, the CPI is 0.9, and the SPI is 1.2, what is the EAC?
Answer: C. 1111.11
One method that the EAC (estimate at completion) can be calculated is BAC (budget at completion) divided by CPI (cost performance index), or EAC = BAC/CPI; the SPI is irrelevant for the EAC. Because the CPI is under 1.0, then you know that the project is not doing well. Therefore, you can conclude that the project will cost more than originally planned, which is 1000, the BAC, without even doing any math. One way to look at the problem is “If this $1000 project is only getting $0.90 of value out of every dollar so far, if we continue at this pace, how much will this project cost by the time we are done?”
One of the reports you are asked to produce is an S-curve diagram. Through your experience, you know that S-curve data is based on earned value. Therefore, you must __________ at the start of the project in order to have accurate S-curve reports.
A. Set a baseline
B. Use project management software
C. Create a contingency plan
D. Perform a variance analysis
Answer: A. Set a baseline
In order to provide earned value, a baseline must be set, usually at the beginning of the project. This will allow project managers to measure the original snapshot against actual performance.
One of your monthly reports claim that your project has a SV of -1000. How would you describe it to your sponsor?
A. The project is behind schedule
B. The project is ahead of schedule
C. Impossible to have a negative SV
D. Not enough information
Answer: A. The project is behind schedule
SV (schedule variance) is simply a measure of how the project is performing in terms of schedule. A positive number is good, ahead of schedule, while a negative number is bad, behind schedule. SV is derived from EV (earned value) minus PV (planned value).
One of your monthly reports claim that your project has a CV of 2000. How would you describe it to your sponsor?
A. The project is $2000 over budget
B. The project is $2000 under budget
C. CV of anything over 1000 is irrelevant
D. Not enough information
Answer: B. The project is $2000 under budget
CV (cost variance) is simply a measure of how the project is performing in terms of cost. A positive number is good, under budget, while a negative number is bad, over budget. CV is derived from EV (earned value) minus AC (actual cost).
Six months into a year-long project your CPI is 0.8. However, your SPI is 1.2. This means that the project is:
A. Ahead of schedule and under budget
B. Ahead of schedule and over budget
C. Behind schedule and under budget
D. Behind schedule and over budget
Answer: B. Ahead of schedule and over budget
For both Cost Performance Index (CPI) and Schedule Performance Index (SPI), 1.0 is exactly as planned, over 1.0 is good and under 1.0 is bad. So in this case, the CPI is bad and SPI is good. In this example, the CPI means you are getting $0.80 of value out of every $1 spent (see CPI — what is it trying to tell me?) while the SPI means you are progressing at 120% (i.e. 20% better than planned) of the baseline.
As the project manager with a cost conscience sponsor, you have been monitoring earned value throughout the year long project. At the halfway point, you report that the CPI is 0.8. This means that the project is:
A. Ahead of schedule
B. Under budget
C. Behind schedule
D. Over budget
Answer: D. Over budget
The Cost Performance Index (CPI) determines how much value you are earning per $1 spent. A CPI of 1.0 means you are on target and means that for every $1 you are putting into the project, you are getting $1 of value in return. Therefore, a CPI of 1.5 means that you are getting $1.50 for every $1 you put in, which is a good thing. Conversely, a CPI of 0.8 represents only getting $0.80 per $1, not so good. In short, over 1.0 is good, under 1.0 is bad.
If EV = 25,000, PV = 30,000, and AC = 29,000, what is the SPI?
Answer: A. 0.83
SPI (Schedule Performance Index) is calculated by EV (Earned Value)/PV (Planned Value). The 0.83 means that the project is progressing at 83% of the baseline.
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