6.4 Cost Variances c) Identify budgeted and applied

6.4  Analysis and Management Reports

Guideline 22
– Calculate Schedule Variance and Cost Variance

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a) Generate the following information (monthly)
at the control account and other levels as necessary for management control
using actual cost data from, or reconcilable with, the accounting system:

·        
Comparison of the amount of planned budget
and the amount of budget earned for work accomplished. This comparison provides
the schedule variance.

·        
Comparison of the amount of budget earned and
the actual (applied where appropriate) direct costs for the same work. This
comparison provides the cost variance.

Earned Value
Management System (EVMS) performance data reconciles to the general books of
account (accounting system) and provides for management control. Visibility
into project performance helps the project manager to focus resources on those
areas in need of attention.

 

Guideline 23
– Identify Significant Variances for Analysis

b) Identify, at least monthly, the significant
differences between both planned and actual schedule performance, and planned
and actual cost performance, and provide the reasons for the variances in the
detail needed by program management.

The ability
to analyse deviations from the established plan permits management at all
levels to rapidly and effectively implement corrective actions to regain
project/contract objectives. Without this visibility into and the understanding
of plan deviations, the success of the project can be jeopardized. Additionally,
insight into future cost and schedule performance, based on the analysis of
variances, will be facilitated.

 

Guideline 24
– Analyse Indirect Cost Variances

c) Identify budgeted and applied (or actual)
indirect costs at the level and frequency needed by management for effective
control, along with the reasons for any significant variances.

Ongoing
indirect cost analysis provides visibility into potential indirect cost
overruns and the opportunity to develop and implement management action plans
to meet project objectives.

 

Guideline 25
– Summarize Information for Management

d) Summarize the data elements and associated
variances through the program organization and/or work breakdown structure to
support management needs and any customer reporting specified in the project.

Understanding
the relationship among scope, cost, schedule, and risk is critical to
successful project execution. Variances provide an understanding of project
conditions, allowing the project manager to properly address project issues,
risks, and opportunities. They also identify significant problem areas coming
from all levels of the organization and project scope of work, derived from the
same data sources. Variances provide valuable management information.

 

Guideline 26
– Implement Corrective Actions

e) Implement managerial action taken as the
result of earned value information.

Earned value
management information provides management with early insight into the extent
of problems. Management action is required to mitigate the impacts on the
project objectives.

 

Guideline 27
– Revise Estimate at Completion (EAC)

f) Develop revised estimates of cost at
completion based on performance to date, commitment values for material, and
estimates of future conditions. Compare this information with the performance
measurement baseline to identify variances at completion important to company
management and any applicable customer reporting requirements including
statements of funding requirements.

A
properly established and maintained estimate at completion (EAC) will ensure
continuing visibility into the cost, schedule, risks and opportunities, as well
as the resource needs (e.g. labour, material, etc.) for the remaining work that
is essential to project success for both the customer and the contractor.
Accurate estimates support the customer’s ability to provide sufficient funding
to the 

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