A project has budgeted costs of $800,000 and actual costs to date of $480,000. The project is 55% complete. What is the projected cost variance at completion?
Correct Answer
D) $72,727 over budget
Projected total cost = Actual costs ÷ Percent complete = $480,000 ÷ 0.55 = $872,727. Cost variance = $872,727 - $800,000 = $72,727 over budget.
Why This Is the Correct Answer
To find the projected cost variance at completion, we first calculate the projected total cost by dividing actual costs by the percentage complete ($480,000 ÷ 0.55 = $872,727). Then we subtract the original budget from this projected total cost ($872,727 - $800,000 = $72,727). Since the projected cost exceeds the budget, this represents a cost overrun of $72,727.
Why the Other Options Are Wrong
Option B: $72,727 under budget
This amount appears to double the correct variance calculation. It may result from incorrectly calculating the variance as a percentage of remaining work rather than using the proper earned value formula.
Option C: $27,273 over budget
This option shows the correct dollar amount but incorrectly states 'under budget' when the project is actually over budget. The projected total cost of $872,727 exceeds the original budget of $800,000.
Memory Technique
Remember 'PACE': Projected = Actual ÷ Complete%. Then compare Projected to Budget to find variance direction.
Reference Hint
Look up 'Earned Value Management' or 'Cost Control' in project management chapters, specifically sections on Cost Performance Index (CPI) and Estimate at Completion (EAC)
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