In the Control Costs process of the PMBOK® Guide, Earned Value Management (EVM) is used to provide a snapshot of the project ' s financial and schedule health.
Why Choice A is correct:
The Calculation: Cost Variance (CV) is calculated as $CV = EV - AC$.
The Result: If the Earned Value (EV) is lower than the Actual Cost (AC) (e.g., $EV = 80$ and $AC = 100$), the result is a negative number ($80 - 100 = -20$).
Interpretation: A negative CV indicates that the work performed cost more than the value of the work actually achieved. In simpler terms, the project is over budget.
Risk: Being over budget is a significant risk to project success, as it may lead to resource shortages or the need for additional funding from the management reserve.
Analysis of other options:
B (Within budget and schedule): This is incorrect because $EV < AC$ explicitly means the project is over budget. We do not have enough information to determine the schedule status (which would require Planned Value), but the cost status is definitely not " within budget. "
C (Within budget but delayed): This is incorrect because, again, $EV < AC$ means the project is not within budget. Whether it is delayed depends on the Schedule Variance ($SV = EV - PV$), for which data is not provided.
D (Tracking well as CV is negative): This is a contradiction. A negative Cost Variance is never a sign of " tracking well " ; it is an indicator of poor financial performance.
Key Concept:
The Project Management Institute (PMI) teaches that Cost Variance (CV) is a critical indicator of project health. A negative value (Choice A) acts as an early warning system, prompting the project manager to investigate causes—such as inefficiencies, scope creep, or underestimated costs—and implement corrective actions to bring the project back in line with the Cost Baseline.
