Question 122

Actual cost is the tool a project manager should use to calculate cost variance for a project.

Cost variance is determined by comparing the actual cost incurred for the work performed against the planned cost. Therefore, the actual cost is essential for calculating this variance accurately.

A) Contingency analysis

Contingency analysis is a risk management tool used to evaluate potential risks and their impacts on a project. While it is important for assessing project risks, it does not directly provide the necessary data to calculate cost variance.

B) Review lessons learned from similar projects

Reviewing lessons learned from similar projects can provide valuable insights for future projects and help avoid past mistakes. However, this approach does not yield the specific data needed for calculating cost variance, as it lacks the quantitative focus required.

C) Actual cost

Actual cost is the amount of money that has been spent on a project up to a specific point in time. It is a crucial component in calculating cost variance, as it allows project managers to compare actual expenditures against the budgeted costs, thus directly informing the variance calculation.

D) Expert judgment

Expert judgment involves leveraging the experience and knowledge of experts to make informed decisions. While it can be useful in project management, it does not provide the concrete financial data necessary for calculating cost variance, making it less suitable for this specific task.

Conclusion

Actual cost is the definitive tool for calculating cost variance as it provides the necessary financial metrics for comparison against planned costs. The other options, while valuable for different aspects of project management, do not directly contribute to the calculation of cost variance, underscoring the importance of actual cost in this context.