There is a project with three activites planned for a year (Units are in Rial) (3...

There is a project with three activites planned for a year (Units are in Rial)

• ‘Activity A’ with a planned cost of 2100,
• ‘Activity B’ with a planned cost of 1500 and
• ‘Activity C’ with a planned cost of 2500.
• Activity A turned out to be more expensive (with an additional 300).
• ‘Activity B’ was done as budgeted.
• ‘Activity C’ is not finished within the year, and only 1500 was spent on it.
• An additional activity ‘Activity D’ was needed and performed with a cost of 500.
What is the cost variance for the given year?Also write a detailed conclusion on the
cost performance

Expert Solution

Cost variance is the difference of budgeted cost of works performed (BCWP) and actual cost of works performed (ACWP) and it is denoted by CV.

Cost performance is measured by cost performance index (CPI). CPI is the ratio of BCWP and ACWP.

If CPI is less than 1, project is more expensive than budgeted.

If CPI is equal to 1, project is running on budget.

If CPI is greater than 1, project is less expensive than budgeted.

Accordingly solution as follows

Ally Wells answered 8 months ago

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