Cost variance is computed by - PMP Practice Questions

Question

Cost variance is computed by:

Answers

Subtracting planned value from actual cost
correct

Subtracting actual cost from earned value
Subtracting budget at completion from earned value
Subtracting BAC from ETC

Explanation

The correct answer is b.

The formula for cost variance (CV) is:

CV=Earned Value EV −Actual Cost AC CV=Earned Value EV −Actual Cost AC

This calculation helps project managers assess whether they are under or over budget at a given point in time. A positive cost variance indicates that the project is under budget, while a negative variance signifies a budget overrun, making it a crucial metric for financial management in projects

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