EVM EVM Variance Analysis and Interpretation 2 — Questions and Answers
Question 1: What does a Cost Performance Index (CPI) of 0.85 indicate?
- The project is delivering $1.15 of value for every dollar spent
- The project is 85% complete
- The project is delivering only $0.85 of value for every dollar spent (Correct answer)
- The project is 15% ahead of schedule
Correct answer: The project is delivering only $0.85 of value for every dollar spent
CPI = EV/AC; a CPI of 0.85 means only $0.85 of earned value is being generated for each $1.00 of actual cost, indicating a cost overrun.
Question 2: What is the primary purpose of establishing variance thresholds in an EVM system?
- To eliminate all variances from the project
- To trigger management attention only when deviations are significant (Correct answer)
- To automatically extend the project schedule when costs rise
- To reduce the project budget automatically when performance is good
Correct answer: To trigger management attention only when deviations are significant
Variance thresholds define the point at which variances become significant enough to require escalation and formal management action.
Question 3: Which EVM performance metric is generally considered most stable and reliable for forecasting after a project reaches 20% completion?
- Schedule Variance (SV)
- Schedule Performance Index (SPI)
- Cost Performance Index (CPI) (Correct answer)
- Variance at Completion (VAC)
Correct answer: Cost Performance Index (CPI)
Research by Christensen and others shows that CPI stabilizes after 20% project completion and rarely improves by more than 10%, making it the most reliable forecasting indicator.
Question 4: What does a negative Variance at Completion (VAC) indicate at the time of reporting?
- The project will finish ahead of schedule
- The project will come in under its original budget
- The project is predicted to overrun its budget at completion (Correct answer)
- The project has earned more value than planned
Correct answer: The project is predicted to overrun its budget at completion
A negative VAC (BAC - EAC < 0) means the EAC exceeds the BAC, indicating the project is projected to cost more than originally budgeted.
Question 5: In EVM reporting, what is 'management by exception'?
- Reporting all variances regardless of their size
- Focusing management attention only on significant deviations from the baseline (Correct answer)
- Exempting senior managers from reviewing EVM reports
- Eliminating small variances by adjusting the performance baseline
Correct answer: Focusing management attention only on significant deviations from the baseline
Management by exception is the practice of highlighting only significant variances that exceed predefined thresholds, allowing managers to focus on the most critical issues.
Question 6: An SPI of 1.0 means what for a project's schedule status?
- The project is over budget
- The project is behind schedule
- The project is progressing exactly as planned (Correct answer)
- The project will complete significantly early
Correct answer: The project is progressing exactly as planned
An SPI of 1.0 (EV/PV = 1.0) means earned value equals planned value, indicating the project is progressing exactly on schedule.
Question 7: What does analyzing EVM variance trends over multiple reporting periods help project managers identify?
- The total project budget remaining
- Whether performance problems are improving, worsening, or remaining stable (Correct answer)
- The names of individual underperforming team members
- The mathematically precise final completion date
Correct answer: Whether performance problems are improving, worsening, or remaining stable
Trend analysis of variances across multiple periods reveals whether performance issues are systemic or isolated, enabling better-informed corrective action decisions.
EVM EVM Variance Analysis and Interpretation 2
What does a Cost Performance Index (CPI) of 0.85 indicate?