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1. What is a cost variance on a project?
When actual project spending is different than planned project spending.
When a project is changed through the formal change request process.
When a project manager requests a change to the Project Charter because the project is late or overrun.
2. When calculating cost variance on a project while it is partially complete, what is a factor that project managers must account for when comparing the actual costs to the planned or budgeted costs?
A lag in the financial reporting system can result in actual costs being reported for a different time period than planned costs.
A project is seldom precisely on schedule. The actual costs are for the work actually performed. The planned costs are for the work that should have been performed. The cost variance will be impacted by the amount of schedule variance.
Project estimates are often inaccurate. The project manager must account for the nature of the inaccuracies when doing the calculation.
3. What is the difference between a positive and negative cost variance?
A positive cost variance is a variance for which there is no recovery plan and negative cost variance is one for which there is a recovery plan.
A positive variance indicates the project is underrun and a negative variance indicates it is overrun.
A positive cost variance is a variance that has already occurred and a negative cost variance is one that is anticipated to occur in the future.
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