If material costs budgeted at $10,000 are reduced by 10%, saving $1,000, and Schedule Variance is zero, what is the Cost Variance?

If material costs budgeted at $10,000 are reduced by 10%, saving $1,000, and Schedule Variance is zero, what is the Cost Variance?

• A. $0
• B. $1,000
• C. -$1,000
• D. $9,000

Answer: (B)

Cost Variance shows whether the project is under or over budget, calculated as Earned Value minus Actual Cost (CV = EV − AC). Since Schedule Variance is zero, the work completed has the same value as planned, so EV equals PV. The material budget is 10,000, and reducing costs by 10% means the Actual Cost is 9,000. With EV on the same level as PV at 10,000, CV = 10,000 − 9,000 = 1,000. This positive value indicates a favorable, under-budget result. The other options don’t fit because they require different EV or AC values than provided; for example, a zero CV would need EV and AC to be equal, which isn’t the case here, and a negative or 9,000 CV would imply different relationships between EV and AC.

Cost Variance shows whether the project is under or over budget, calculated as Earned Value minus Actual Cost (CV = EV − AC). Since Schedule Variance is zero, the work completed has the same value as planned, so EV equals PV. The material budget is 10,000, and reducing costs by 10% means the Actual Cost is 9,000. With EV on the same level as PV at 10,000, CV = 10,000 − 9,000 = 1,000. This positive value indicates a favorable, under-budget result. The other options don’t fit because they require different EV or AC values than provided; for example, a zero CV would need EV and AC to be equal, which isn’t the case here, and a negative or 9,000 CV would imply different relationships between EV and AC.