Difficulty: Medium

Average Score: 74%

When does a negative cost variance (CV) occur in earned value management?

Rationale

When the actual cost is more than the earned value.

A negative cost variance (CV) occurs when the actual costs incurred for a project exceed the value of the work that has been completed, indicating that the project is over budget.

A (When cost variance is more than schedule variance) YOUR ANSWER

This choice does not define a negative cost variance. Cost variance being greater than schedule variance simply compares two types of variances but does not indicate whether costs are under or over budget. It does not provide information about the relationship between actual costs and earned value.

B (When the earned value is more than the actual cost) YOUR ANSWER

In this scenario, a positive cost variance results since the project is under budget. When earned value exceeds actual cost, it indicates that the project is progressing well financially, contrary to the definition of a negative cost variance.

C (When the actual cost is more than the earned value) CORRECT

This statement accurately describes a negative cost variance. When actual costs surpass the earned value, it signifies that more money has been spent than what is justified by the work completed, resulting in a negative cost variance.

D (When schedule variance is more than cost variance) YOUR ANSWER

Similar to option A, this choice merely compares two types of variances without establishing the actual relationship between costs and earned value. It does not provide sufficient information to conclude whether the project is over or under budget.

Conclusion

A negative cost variance in earned value management specifically arises when actual costs exceed earned value, indicating budget overruns. Understanding this concept is crucial for project managers to assess financial performance and take corrective measures when necessary. The other options either define different scenarios or focus on comparisons that do not address the core definition of negative cost variance.

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