Six Sigma Global Institute (SSGI) Project Management Professional Certification Practice Exam

How is Cost Variance calculated?

1. Earned Value + Actual Cost

2. Earned Value - Actual Cost

3. Planned Value - Actual Cost

4. Actual Cost - Earned Value

The correct answer is: Earned Value - Actual Cost

Cost Variance (CV) is a key performance metric used in project management to assess the financial performance of a project. It is determined by measuring the difference between the value of the work actually performed (Earned Value) and the actual cost incurred for that work (Actual Cost). The formula for calculating Cost Variance is: Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC) This calculation helps project managers understand 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 Cost Variance signifies that costs are exceeding the budget. The other options provided involve calculations related to project financials but do not specifically represent Cost Variance. Thus, the understanding of Earned Value and Actual Cost is crucial for properly evaluating cost performance in project management.