If the Budget at Completion (BAC) of a project is $2,000,000 and the computed Estimate at Completion (EAC) is $2,200,000, what does this indicate about the project?

Question

BlackTom AI · Accepted Answer

BAC (Budget at Completion) is the total authorized budget for the project; EAC (Estimate at Completion) is the current forecast of the total cost required to complete the project based on performance to date. When EAC differs from BAC, the difference shows a projected variance (overrun or underrun).

1. Relevant knowledge points and concepts
- BAC = planned total budget (here $2,000,000).
- EAC = forecasted final cost given current performance (here $2,200,000).
- Cost variance at completion = EAC − BAC. A positive result means a projected overrun; a negative result means a projected underrun.
- Percent overrun = (EAC − BAC) / BAC × 100%.

2. Step-by-step reasoning
- Start with the two given values: BAC = $2,000,000; EAC = $2,200,000.
- Compute the difference to determine the projected variance.

3. Calculations (all intermediate steps)
- Difference: EAC − BAC = $2,200,000 − $2,000,000 = $200,000.
- Percent overrun: ($200,000 / $2,000,000) × 100% = 0.10 × 100% = 10%.

4. Why the correct answer is correct
- The positive difference of $200,000 means the project is forecast to spend $200,000 more than the approved budget if current trends continue. That directly matches the statement: “The project is expected to exceed its approved budget by $200,000 if current performance continues.”

5. Why the other options are incorrect
- Option 2 (ahead of budget by $200,000) is the opposite of the computed result; the project is over budget, not under.
- Option 3 (additional $200,000 indicates within 10% allowable contingency) is an unsupported assumption. Although $200,000 equals 10% of $2,000,000, nothing in the given data says a 10% contingency is allowed or that this overrun is acceptable.
- Option 4 (under budget by $200,000) contradicts the arithmetic; EAC exceeds BAC, so this is not an underrun.

6. Conclusion
The correct conclusion is that the project is expected to exceed its approved budget by $200,000 if current performance continues, which matches the provided answer.

If the Budget at Completion (BAC) of a project is $2,000,000 and the computed Estimate at Completion (EAC) is $2,200,000, what does this indicate about the project?单项选择题

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