The following Gantt chart displays the schedule for a software upgrade project. The system analysis was completed on August 12^th, but the system design and development activities are still in process as of October 3^rd. Once the product is developed, the project team will need to test and deploy it, which must be completed by October 17^th. The method used to determine the earned value is based on percent complete.

What is the cost variance as of October 3^rd?



A. -$650
B. $3,750
C. $650
D. $3,100

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HINT: Cost variance (CV) is the earned value (EV) minus the actual costs (AC).

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Answer and Explanation:
The correct answer is C.

Cost variance (CV) is the earned value (EV) minus the actual costs (AC). The current earned value is the sum of the earned values for every activity that has either been completed or is in progress. Thus, the earned value can be calculated by multiplying the activity's percent complete by the activity's planned value. The actual costs are the total costs of individual activities. Note, since the scenario mentions that the method used to determine the earned value is based on percent complete, the earned value of a partially completed work package is calculated by multiplying the planned value of the work package by its the percent complete.

The calculations are shown below:

EV = EV of activity 1 + EV of activity 2 + EV of activity 3 = (1 x $500) + (0.75 x $1,000) + (0.50 x $5,000) = $3,750

AC = AC of activity 1 + AC of activity 2 + AC of activity 3 = $600 + $500 + $2,000 = $3,100

CV = EV - AC = $3,750 - $3,100 = $650

Therefore, the cost variance (CV) in this scenario is $650. Since the CV is a positive value, the project is running under planned costs. Note, the information about testing and deployment that must be completed by October 17^th is irrelevant for selecting the correct answer.

Details for each option:

A. Incorrect. This answer choice represents an incorrect usage of the formula for the cost variance where the EV and AC are transposed.

B. Incorrect. $3,750 represents the earned value of the project to date. The question is asking for the cost variance and not the earned value.

C. Correct. Cost variance (CV) is the earned value (EV) minus the actual costs (AC). In this case, CV = EV - AC = $3,750 - $3,100 = $650.

D. Incorrect. This answer choice represents the total costs of the project to date. The question is asking for the cost variance and not the project costs.

Reference: A Guide to the Project Management Body of Knowledge (PMBOK^® Guide) – Seventh Edition, Project Management Institute Inc., 2021,
2.7.2.3 Baseline Performance
2.7.2.7 Forecasts

Process Groups: A Practice Guide, Project Management Institute Inc., 2023,
7.6 Control Costs
10 Tools and Techniques

Practice Standard for Earned Value Management - Second Edition, Project Management Institute Inc., 2011,
7.3.1 Discrete Effort

Additional resources:
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