TOPIC: Free PMP® Exam Sample Question of the Week

Hello everyone! Here is this week's free PMP® exam sample question from the PM Exam Simulator.

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



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 the individual activities.

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) = $3750

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 17th is irrelevant for selecting the correct answer.

Details for each option:

A. -$650
Incorrect. This answer choice represents an incorrect usage of the formula for the cost variance where the EV and AC are transposed.

B. $3,750
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. $650
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. $3,100
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) – Sixth Edition, Project Management Institute Inc., 2017, Page(s) 262; see also www.project-management-prepcast.com/pmp-formulas