Practice: Discussion on Calculating Cost Variance (LOs: 6c, 6d, 6e)
In this discussion, you will calculate the cost variance for this practice learning activity. Topic Focus:
PMI Earned Value Management Terms and Formulas
Calculating Cost Variance
EVM Scenario Data: Planned Value (PV) = ₦500,000
Earned Value (EV) = ₦450,000
Actual Cost (AC) = ₦550,000 Task: Students should:
- Calculate Cost Variance : CV = EV – AC).
- Calculate Schedule Variance : SV = EV – PV).
- Interpret the results (Is the project over budget? Behind schedule?).
- Suggest possible corrective actions.
General Feedback: This activity was meant to help you practice calculating and understanding basic EVM formulas. The correct used formulas for Cost Variance is CV = EV – AC and Schedule Variance is SV = EV – PV. Strong answers did not only calculate the numbers but also explained what they mean. For example, a negative cost variance means the project is over budget, and a negative schedule variance means the project is behind schedule. ANSWER:(a) CV = – ₦100,000; (b) SV = – ₦50,000; (c) The project is over budget (spending more than planned). The project is behind schedule (less work completed than planned). (d) Review and control unnecessary expenses. Reallocate or increase resources to speed up work. Improve team efficiency.