EVM EVM Variance Analysis and Interpretation 2

Question 1

What does a Cost Performance Index (CPI) of 0.85 indicate?

Accepted Answer

The project is delivering only $0.85 of value for every dollar spent

Answer

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?

Accepted Answer

To trigger management attention only when deviations are significant

Answer

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?

Accepted Answer

Cost Performance Index (CPI)

Answer

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?

Accepted Answer

The project is predicted to overrun its budget at completion

Answer

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'?

Accepted Answer

Focusing management attention only on significant deviations from the baseline

Answer

Management by exception is the practice of highlighting only significant variances that exceed predefined thresholds, allowing managers to focus on the most critical issues.

EVM Certification Practice Test

EVM Certification Practice Test

EVM EVM Variance Analysis and Interpretation 2