Most PMP candidates can recite the EVM formulas without hesitation. Ask them CV = EV - AC and they’ll answer instantly. But hand them a story problem where the project spent more than planned and many will circle the wrong answer.
The problem is not the formula. It is the sign.
Here is the one rule that makes every EVM question predictable.
What EV, PV, and AC Actually Mean
Before the formulas, get these three numbers clear.
PV (Planned Value) is what you budgeted to have done by today. If your plan says $50,000 worth of work should be complete by Friday, PV = $50,000.
EV (Earned Value) is the budgeted cost of the work you actually finished. If you planned to spend $35,000 on the tasks you completed by Friday, EV = $35,000.
AC (Actual Cost) is what you actually spent. If you spent $45,000 to do that $35,000 worth of work, AC = $45,000.
Here is the part that trips people: EV is always measured in budget dollars, not actual dollars. EV is not how much you billed the client. It is how much you planned to spend on what you actually finished.
The Four Formulas
CV = EV - AC (Cost Variance)
SV = EV - PV (Schedule Variance)
CPI = EV / AC (Cost Performance Index)
SPI = EV / PV (Schedule Performance Index)
EV appears in every formula. Every single one. If you forget the structure, remember that EV is always the anchor.
The Sign Rule (Learn This Once)
For variances (CV and SV): positive is good, negative is bad.
For indexes (CPI and SPI): greater than 1 is good, less than 1 is bad.
That is the whole rule.
Here is why it works. Look at CV = EV - AC.
If you completed $100,000 of work and spent $80,000 to do it, CV = +$20,000. You got more value than you paid for. Positive = good.
If you completed $80,000 of work but spent $100,000 to do it, CV = -$20,000. You paid more than what you got. Negative = bad.
The same logic runs through SV = EV - PV. If your earned value is higher than your planned value, you finished more work than scheduled. Positive = ahead. Negative = behind.
A Quick Memory Trick
For the indexes, think of CPI like a return on a dollar. A CPI of 0.8 means you get 80 cents of planned work for every dollar you spend. Nobody wants a 20-cent loss on every dollar. Less than 1 = losing money. Greater than 1 = getting more than you paid for.
The Exam Trap You Will See
The PMP does not hand you EV, PV, and AC directly. It wraps them in a story.
Here is a common pattern:
“Your project has a budget of $200,000 and is scheduled to complete in 10 weeks. After 5 weeks, you have completed 40% of the work and spent $90,000. What is the cost variance?”
Step 1: Pull the numbers. - Budget at Completion (BAC) = $200,000 - You are at week 5 of 10, so PV = 50% × $200,000 = $100,000 - You finished 40% of work, so EV = 40% × $200,000 = $80,000 - AC = $90,000 (given)
Step 2: Apply the formula. - CV = EV - AC = $80,000 - $90,000 = -$10,000
Step 3: Read the sign. - Negative CV = over budget.
Step 4: Find the right answer.
The answer choices will include “$10,000 over budget” and “($10,000)” and sometimes “-$10,000 under budget” to catch people who flip the interpretation.
That last option is the trap. Some candidates see the negative number and think the project is saving money. It is not. Negative CV = over budget. Always.
The Double Trap (This One Is Sneaky)
Here is where prepared candidates still make mistakes.
The exam will describe a project where the manager says “we are performing above budget.” That phrase means under cost, which means CPI > 1 and CV > 0.
But when the question asks “what is the variance?” and you calculate a positive number, some answer choices will say “the project is over budget by X” using that same absolute value. Candidates moving fast will pick it.
Sign first. Interpretation second. Answer third.
The reverse happens with SV. An SV of -$15,000 means behind schedule. If an answer says “ahead of schedule by $15,000” with the matching number, that answer is wrong. The sign changed the meaning.
CPI and SPI in Practice
CPI = EV / AC
- CPI of 1.0: you spend exactly what you planned per unit of work. On track.
- CPI of 0.9: for every $1 spent, you get $0.90 of planned work. Over budget.
- CPI of 1.1: for every $1 spent, you get $1.10 of planned work. Under budget.
SPI = EV / PV
- SPI of 1.0: you complete work at exactly the planned pace. On track.
- SPI of 0.85: you are only 85% as productive as planned. Behind schedule.
- SPI of 1.15: you finish work faster than planned. Ahead of schedule.
Why the Indexes Matter Beyond the Question
CPI feeds the most common Estimate at Completion formula: EAC = BAC / CPI. If your CPI is 0.8, your revised total cost estimate is BAC divided by 0.8, which is 25% more than you planned. The exam tests this connection regularly. A CPI below 1 almost always sets up a follow-on question about how much the project will cost to finish.
When the Numbers Conflict
You will see questions where CPI > 1 but SPI < 1. That means you are under budget but behind schedule.
The team is managing costs well but moving slowly. Maybe a vendor is late. Maybe the fast tasks were expensive ones and the cheap ones keep slipping.
In this scenario, the exam typically asks where the project manager should focus. The common right answer is schedule, because a missed deadline is often harder to recover from than a cost overrun in the early weeks. But read the question. If the sponsor cares only about cost, the answer may flip.
The formulas do not change. The priority judgment depends on what the question values.
A Decision Tree for Every EVM Question
- Find EV, PV, and AC in the story.
- Identify which metric the question asks for.
- Calculate using the formula.
- Check the sign or compare the ratio to 1.
- Match the interpretation to the answer choice that says the right thing (over or under, ahead or behind).
- If two choices show the same absolute number with opposite interpretations, trust the sign.
Practice Problem
“A software project has BAC = $500,000 and runs 12 months. After month 3, the team completed 30% of the work and spent $175,000.”
- PV = 3/12 × $500,000 = $125,000
- EV = 30% × $500,000 = $150,000
- AC = $175,000
CV = $150,000 - $175,000 = -$25,000 (over budget)
SV = $150,000 - $125,000 = +$25,000 (ahead of schedule)
CPI = $150,000 / $175,000 = 0.857 (over budget)
SPI = $150,000 / $125,000 = 1.20 (ahead of schedule)
This project is ahead of schedule but over budget. The team moves fast but spends more per task than planned. The exam follow-up will ask what to investigate. The answer is cost, not schedule.
The One-Line Summary
Positive variance = good. Greater-than-1 index = good. Apply that to every story problem and EVM questions stop being traps.
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