CAPM Predictive Plan-Based Methodologies Practice Question
A project manager is reviewing the project's cost performance. The actual cost (AC) is $50,000, the earned value (EV) is $45,000, and the planned value (PV) is $60,000. What is the cost variance (CV)?
⚠ Common exam trap
A common mix-up: candidates confuse cost variance (CV = EV - AC) with schedule variance (SV = EV - PV) or incorrectly subtracting AC from EV, leading candidates to pick $5,000 or -$15,000.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
-$5,000
Cost variance (CV) is calculated as EV minus AC. Here, EV = $45,000 and AC = $50,000, so CV = $45,000 - $50,000 = -$5,000. A negative CV indicates the project is over budget, which matches option C.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
$5,000
Why it's wrong here
$5,000 is the magnitude of the variance but omits the negative sign, since EV ($45,000) is below AC ($50,000), indicating overspend. It is tempting because the arithmetic difference is right, and positive cost variance genuinely occurs when earned value exceeds actual cost.
- ✗
-$15,000
Why it's wrong here
-$15,000 is EV minus PV ($45,000 minus $60,000), which is the schedule variance, not the cost variance. It is tempting because both formulas subtract two earned-value metrics, and a negative result correctly signals behind-schedule performance, but cost variance uses AC.
- ✓
-$5,000
Why this is correct
Cost variance is EV minus AC, so $45,000 − $50,000 = −$5,000. The negative sign satisfies the stem's cost performance review: the project has spent more than the value earned, indicating an overrun of $5,000 against the actual cost constraint.
- ✗
$10,000
Why it's wrong here
Cost variance is EV minus AC, giving $45,000 minus $50,000, which equals -$5,000, not $10,000. The figure $10,000 is tempting because it is the difference between planned value and actual cost, a comparison that belongs to schedule or budget reporting rather than cost variance.
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