Final answer:
Cost Variance is calculated as Earned Value minus Actual Cost and reflects the project's cost performance. A positive Cost Variance indicates the project is under budget, while a negative one indicates it is over budget.
Step-by-step explanation:
To calculate Cost Variance, we use the formula: Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC). Essentially, this measures how well the project is staying on budget. When you have a positive Cost Variance, it indicates that the project is under budget. Conversely, a negative Cost Variance suggests that the project has cost overruns and is over budget.
The provided reference discusses total cost, fixed cost, and variable cost, as well as marginal cost, average cost, and average variable cost. However, these are separate concepts from Cost Variance and relate to cost measurements per unit of output versus total costs. To answer the student's question, option b) is correct: Cost Variance is calculated as Earned Value - Actual Cost. A positive Cost Variance does not indicate cost overruns, but rather cost savings or being under budget, which contradicts option c). Option d) is incorrect as it suggests that a negative Cost Variance indicates cost savings, which is the opposite of the actual interpretation. Therefore, the correct information is that a positive Cost Variance signifies that the project is spending less than planned, and a negative Cost Variance indicates the project is over budget.