Financial Management for Project Managers Earned Value Management 1 — Questions and Answers
Question 1: In Earned Value Management (EVM), the Budget at Completion (BAC) represents:
- The amount spent on the project so far
- The total authorized budget for the entire project (Correct answer)
- The value of work actually completed to date
- The estimated cost to finish remaining work
Correct answer: The total authorized budget for the entire project
BAC is the total planned budget authorized for the project, established during planning and used as the baseline denominator in many EVM calculations.
Question 2: Earned Value (EV) in EVM is defined as:
- The actual amount of money spent on the project
- The budgeted cost of work that has been completed (Correct answer)
- The planned cost of work scheduled to be done by now
- The difference between planned and actual costs
Correct answer: The budgeted cost of work that has been completed
EV (also called BCWP — Budgeted Cost of Work Performed) measures the value of work actually completed, expressed in terms of the approved budget for that work.
Question 3: Cost Variance (CV) in EVM is calculated as:
- PV - AC
- EV - AC (Correct answer)
- EV - PV
- BAC - EAC
Correct answer: EV - AC
Cost Variance = EV - AC; a positive CV means the project is under budget, and a negative CV means it is over budget.
Question 4: Schedule Variance (SV) in EVM is calculated as:
- AC - PV
- BAC - EV
- EV - PV (Correct answer)
- EV - AC
Correct answer: EV - PV
Schedule Variance = EV - PV; a positive SV means the project is ahead of schedule, and a negative SV means it is behind schedule.
Question 5: A Cost Performance Index (CPI) of 0.85 means:
- The project is 85% complete
- For every dollar spent, only $0.85 of planned value is earned — the project is over budget (Correct answer)
- The project will finish 15% under budget
- Costs are running 15% below the planned baseline
Correct answer: For every dollar spent, only $0.85 of planned value is earned — the project is over budget
A CPI less than 1.0 indicates cost overrun — the project is getting only $0.85 of earned value for every $1.00 actually spent.
Question 6: The Schedule Performance Index (SPI) is calculated as:
- EV / AC
- AC / PV
- EV / PV (Correct answer)
- PV / BAC
Correct answer: EV / PV
SPI = EV / PV; an SPI greater than 1.0 indicates the project is ahead of schedule, and an SPI less than 1.0 indicates it is behind schedule.
Financial Management for Project Managers Earned Value Management 1
In Earned Value Management (EVM), the Budget at Completion (BAC) represents: