At Month 4 of a project, PV = $1.2M, EV = $0.95M, and AC = $1.10M. Which interpretation is correct?

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BlackTom AI · Accepted Answer

First, let’s compute the key Earned Value Management indicators to interpret the project status. The Cost Variance (CV) = EV − AC = 0.95 − 1.10 = −0.15 million, which is negative and indicates the project is spending more than earned value, i.e., over budget. Next, Schedule Variance (SV) = EV − PV = 0.95 − 1.20 = −0.25 million, which is also negative, meaning the project is behind schedule. Moving to performance indexes can reinforce the interpretation: the Cost Performance Index (CPI) = EV / AC = 0.95 / 1.10 ≈ 0.86, which is less than 1 and confirms over budget on cost. The Schedule Performance Index (SPI) = EV / PV = 0.95 / 1.20 ≈ 0.79, also less than 1, confirming behind schedule. Option 1: Over budget, behind schedule. This aligns with both CV < 0 and SV < 0, indicating the project is both overspent and delayed. The negative CV shows cost overrun relative to actual costs, and the negative SV shows timing slipped relative to the planned value. Option 2: Under budget, ahead of schedule. This is inconsistent with the computed CV and SV, since they are both negative, not positive. Being under budget and ahead would require CV > 0 and SV > 0 (or at least CV ≥ 0 and SV ≥ 0). Option 3: Over budget, ahead of schedule. While the over-budget part would match, the ahead-of-schedule claim would require SV > 0, which is false here because SV is negative, indicating a delay rather than advancement. Option 4: On budget, behind schedule. The data show costs exceed earned value (CV < 0), so the project is not on budget. Additionally, the negative SV confirms behind schedule, so this option is incorrect. In summary, the combination of CV < 0 and SV < 0 identifies the project as over budget and behind schedule, making Option 1 the consistent interpretation given PV, EV, and AC values.

BU.300.620.51.FA25 Managing Complex Projects – Final Exam (35Q)

At Month 4 of a project, PV = $1.2M, EV = $0.95M, and AC = $1.10M. Which interpretation is correct?

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