PMP Question of the Week: Budgets

pmpweek01Your project—building a barbed-wire fence around a factory—is undergoing a formal halfway point audit review by your organization’s accounting department. Right at the beginning of the session, one of the accountants publicly berates you for overrunning your budget. You were to spend $250,000 by this time, and you’ve actually spent $300,000. Which of the following should be your reaction?

A. Apologize and promise to improve your spending performance from this point on.
B. Call attention to the fact that you used the organization’s preferred vendors and it’s those vendors’ fault, not yours.
C. Embarrass the accountant by stating that the cost plan was extremely unrealistic in the first place.
D. Explain that in the earned value approach, both cost and production data are needed to do a proper assessment and you “overran” the budget because you are producing ahead of schedule.

The correct answer is D.

The project manager is expected to explain all variances, even positive ones. In this case, the schedule variance is favorable. Answer choices A, B and C all ignore one of the main tenets of earned value represented in answer choice D.

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