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CMA Intermediate · Operations Management and Strategic Management · Project Management, Monitoring and Control

During project monitoring, a negative cost variance (CV = EV − AC) indicates which situation?

A negative cost variance means the actual cost of the work performed exceeds its earned value, so the project is over budget. Cost variance is earned value minus actual cost; schedule position is judged separately by comparing earned value with planned value.

  1. AWork completed has cost less than its budgeted value
  2. BActual cost of work done exceeds its earned valueCorrect
  3. CProject is ahead of schedule
  4. DPlanned value exceeds earned value

Explanation

CV = EV − AC. A negative value means AC is greater than EV, so the project is over budget for the work done. Planned value versus earned value relates to schedule variance, not cost variance.

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