AACE EVP: Account Considerations

Use this focused AACE EVP page to drill Account Considerations decisions before returning to mixed practice, timed mocks, and the full PM Mastery question bank.

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Sample questions

These questions are original PM Mastery practice items aligned to this topic area. They are designed for self-assessment and are not official exam questions.

Question 1

Topic: Account Considerations

A control account manager is preparing the month-end earned value status as of March 31. The accounting system identifies actual cost for earned value reporting on an accrual basis: costs are actual when incurred and recorded through receipt or accrual, not when merely budgeted, committed, paid, or forecast.

Which interpretation is best supported for the earned value report?

• A. Report $310,000 as actual cost because the current forecast represents the expected supplier final cost.
• B. Report $140,000 as actual cost and keep the commitment, cash payment, budget, and forecast in their separate categories.
• C. Report $260,000 as actual cost because the authorized purchase order represents a binding supplier commitment.
• D. Report $75,000 as actual cost because only cash paid by the status date should be included in performance reporting.

Best answer: B

What this tests: Account Considerations

Explanation: For earned value reporting, actual cost should trace to the accounting basis defined for the project. Here, the accounting system uses accrual-based actuals, so actual cost is the cost incurred and recorded for materials received and accepted by the status date. The purchase order is a commitment, not actual cost. The cash payment is a disbursement and may lag the incurred cost. The forecast is an estimate of final cost, not the cost already incurred. Budgeted cost, such as planned value or BAC, is also not actual cost. Keeping these categories separate preserves traceability between the EVMS report and the accounting system.

The accrued cost for received and accepted materials is the accounting actual through the status date.

Question 2

Topic: Account Considerations

At the May status cutoff, accounting replaced the provisional indirect rate with the approved year-to-date rate for the same control account. The scope, physical progress, and approved budget have not changed.

Which interpretation is supported by the exhibit?

• A. Reduce PV by $30,000; SV improves from -$50,000 to -$20,000 because overhead is not direct work scope.
• B. Move $30,000 from management reserve into the control account budget so CPI remains 1.07 after the rate change.
• C. Increase EV by $30,000; CV remains +$30,000 and CPI remains 1.07 because the added overhead was allocated to the control account.
• D. Recognize $30,000 additional AC; CV changes from +$30,000 to $0 and CPI changes from 1.07 to 1.00, with no PMB change.

Best answer: D

What this tests: Account Considerations

Explanation: An indirect-rate or overhead allocation change affects actual cost when the accounting system applies a different rate to recorded direct costs. It does not, by itself, create earned progress or revise the performance measurement baseline. Here, previous AC was direct cost plus 40% overhead: $300,000 + $120,000 = $420,000. Revised AC is direct cost plus 50% overhead: $300,000 + $150,000 = $450,000. EV remains $450,000, so CV changes from $30,000 favorable to $0, and CPI changes from 1.07 to 1.00. PV, EV, BAC, and baseline budgets should change only through approved baseline change control, not merely because accounting updates an indirect rate.

The indirect-rate change increases actual cost from $420,000 to $450,000 while PV, EV, and the baseline remain unchanged.

Question 3

Topic: Account Considerations

At the April 30 status cutoff, a control account manager is reconciling cumulative actual cost for the monthly earned value report.

• EVMS rule: actual cost must reflect costs incurred for authorized work performed through the status date.
• Accounting ledger charges to the control account: $510,000.
• Included in the ledger: $35,000 supplier invoice for material received on May 2 and not used by April 30.
• Excluded from the ledger: $20,000 labor accrual for work performed before April 30.
• Cumulative earned value: $460,000.
• Variance threshold: unfavorable cost variance greater than $25,000 requires variance analysis.

What is the best professional judgment for the April report?

• A. Use reconciled actual cost of $495,000, report cost variance of -$35,000 and CPI of 0.93, and prepare the required variance analysis.
• B. Keep actual cost at $510,000 but increase earned value to $495,000 because the incurred costs indicate additional progress.
• C. Use ledger actual cost of $510,000, report cost variance of -$50,000 and CPI of 0.90, because the accounting ledger is the official source.
• D. Use actual cost of $475,000, report cost variance of -$15,000, and skip variance analysis because the supplier invoice was after cutoff.

Best answer: A

What this tests: Account Considerations

Explanation: For earned value reporting, actual cost must be reconciled to the reporting cutoff. The supplier invoice is in the ledger but relates to material received after the April 30 status date, so it should not be included in April actual cost. The labor accrual is for work performed before the status date, so it should be included even though it is not yet in the ledger charges. Reconciled actual cost is $495,000. With earned value of $460,000, the control account has an unfavorable cost variance of -$35,000 and a CPI of 0.93. Because the unfavorable cost variance exceeds the $25,000 threshold, variance analysis is required. Earned value should not be adjusted to match cost; it must remain tied to objective progress and the authorized measurement basis.

The cutoff reconciliation is $510,000 - $35,000 + $20,000 = $495,000, so CV is $460,000 - $495,000 = -$35,000 and CPI is 0.93.

Question 4

Topic: Account Considerations

At the month-end status cutoff, Control Account 1.2.3 shows AC of USD 482,000 in the EVMS report, while the accounting ledger shows USD 516,000 charged to the same control account. The variance analysis is due tomorrow. The project controls analyst notes these constraints:

• EVMS actual cost must reconcile to the accounting system at the control-account level.
• Only costs incurred through the status date may be included in current-period AC.
• A pending supplier invoice for USD 21,000 relates to work performed after the status date.
• A labor charge of USD 13,000 appears to have been posted to the wrong control-account code.

What is the best reconciliation step?

• A. Use supplier commitments instead of accounting actuals for the current month because commitments better reflect expected project cost.
• B. Perform a transaction-level tie-out, exclude the post-status-date invoice from current AC, correct or transfer the miscoded labor charge, and document the reconciliation trail.
• C. Increase the EVMS report AC to USD 516,000 so the control account agrees with the ledger total before variance analysis is submitted.
• D. Move USD 34,000 of budget from another control account to offset the accounting difference and keep the cost variance stable.

Best answer: B

What this tests: Account Considerations

Explanation: A proper reconciliation resolves the cause of the difference, not merely the total. EVMS actual cost should be traceable to the accounting system, but it must also respect status cutoff rules and correct control-account coding. Here, the ledger total includes a supplier invoice for work after the status date, so it should not be included in current-period AC. The miscoded labor charge should be corrected through the accounting process or a documented transfer to the proper control account. The reconciliation should leave an audit trail showing how the EVMS report ties to approved accounting records after cutoff and coding corrections. Changing budgets or substituting commitments would not resolve the accounting-to-EVMS discrepancy.

This action reconciles actual cost to accounting while preserving cutoff discipline, control-account traceability, and audit evidence.

Question 5

Topic: Account Considerations

At the 30 September status date, a draft control account report shows the following amounts in thousands (K). Use \( \text{CPI}=\text{EV}/\text{AC} \) and \( \text{CV}=\text{EV}-\text{AC} \).

The accounting ledger total includes approved direct labor, material accruals, and a subcontract invoice coded to this control account. The customer reporting procedure requires any AC reconciliation difference greater than 25K to be resolved or disclosed before final issue.

Which response best protects actual-cost traceability and report credibility?

• A. Treat the draft as unreconciled, resolve or disclose the 70K AC difference before final issue, and avoid presenting the draft CPI of 1.10 as reliable.
• B. Move the 70K difference to management reserve until the accounting code is corrected.
• C. Reduce EV by 70K so the reported cost variance aligns more closely with the accounting ledger.
• D. Issue the draft unchanged because PV and EV are unaffected, and address the accounting difference in the next reporting cycle.

Best answer: A

What this tests: Account Considerations

Explanation: Actual cost used in earned value reporting must be traceable to the accounting source for the same cutoff and reporting structure. The draft report shows AC of 820K, but the accounting ledger supports 890K for the same control account and status date, a difference of 70K. That exceeds the 25K reconciliation threshold. Using the draft values gives CPI = 900/820 = 1.10 and CV = 80K. Using the accounting-supported AC gives CPI = 900/890 ≈ 1.01 and CV = 10K. The professional response is to stop treating the favorable draft metrics as reliable until the AC mapping, cutoff, or coding issue is resolved, or to disclose the unreconciled condition if reporting cannot wait.

The 70K AC difference exceeds the reporting threshold and would change the performance message from strongly favorable to nearly on plan.

Question 6

Topic: Account Considerations

A control account is preparing its monthly earned value report at the status date. The EVMS accounting guidance requires actual costs to reconcile to the accounting system, including approved burden applied to direct labor. The project’s management reserve is outside the performance measurement baseline and may be released only through approved change control. Accounting shows:

The control account manager asks to use management reserve to offset the burden and keep current cost performance from worsening. What is the best professional judgment?

• A. Add the forecast rate increase to current actual cost and reduce management reserve by the same amount to show full overhead exposure.
• B. Report only the direct labor and direct material as actual cost, because burden is overhead and should be held in management reserve until project closeout.
• C. Report actual cost using the posted direct costs plus the applied burden, keep management reserve outside the baseline, and discuss the forecast rate increase in the EAC narrative.
• D. Reclassify the applied labor burden as direct labor budget and revise the performance measurement baseline retroactively to match accounting actuals.

Best answer: C

What this tests: Account Considerations

Explanation: Direct costs are specifically traceable to the control account, such as the posted labor and material. Indirect cost, overhead, or burden is not directly traceable in the same way, but it may still be part of actual cost when it is allocated through the approved accounting system. Therefore the current EV report should include the posted direct costs and the posted applied burden in actual cost. The possible future overhead rate increase is not yet a posted or accrued actual cost, so it belongs in forecast discussion, such as EAC risk or narrative assumptions. Management reserve is outside the performance measurement baseline and is controlled through change control; it is not a pool for absorbing unfavorable actual costs or improving CPI presentation.

Posted burden is an indirect cost allocated by the approved accounting method, while management reserve is not available to mask current actual cost performance.

Question 7

Topic: Account Considerations

At the February 28 status date, Control Account 230 reports PV of $900,000, EV of $820,000, and AC of $760,000. The control account manager says the draft favorable cost variance will support a lower EAC. Accounting review shows that $180,000 of installed material for Control Account 230 was received before the cutoff date, but the invoice was coded to Control Account 320. The project procedure requires actual costs to be traceable to the responsible control account and to include approved cutoff accruals before variance analysis is finalized. What is the best professional action before issuing the cost variance and forecast?

• A. Reconcile the cost coding and cutoff accrual with accounting, correct the actual-cost assignment with an audit trail, and then reassess the variance and EAC.
• B. Move the earned value for the installed material to Control Account 320 so EV and AC remain aligned.
• C. Keep the favorable cost variance but increase management reserve to cover possible future material cost exposure.
• D. Issue the report as drafted because the accounting ledger is the official actual-cost source for the period.

Best answer: A

What this tests: Account Considerations

Explanation: Actual cost must be traceable to the correct control account and status period before cost variance or forecast conclusions are reliable. Here, the installed material belongs to Control Account 230 and was received before the cutoff date, but the cost was coded elsewhere. Leaving the error uncorrected understates AC for Control Account 230, overstates its cost performance, and can produce an unrealistically favorable CPI and EAC. The professional action is to reconcile with accounting, process the appropriate correction or accrual using the required audit trail, and then interpret the variance and forecast. If timing prevents completion before reporting, the data-quality limitation should be disclosed rather than treated as valid performance.

The apparent favorable variance is unreliable until actual costs are assigned to the correct control account and cutoff period.

Question 8

Topic: Account Considerations

At the September 30 status cutoff, a control account report shows PV = USD 500,000, EV = USD 480,000, and AC = USD 310,000. The control account manager says the CPI looks unusually favorable and asks whether to report the cost underrun as real.

Relevant constraints:

• A subcontractor completed and passed inspection on USD 145,000 of material on September 27.
• The supplier invoice was received on October 3 and has not yet posted to the accounting ledger.
• The open purchase order commitment is USD 160,000.
• The EVMS procedure requires accruals for received goods and services through the status date; commitments alone are not actual cost.

What is the best professional action?

• A. Reduce EV until the supplier invoice posts so that earned value and actual cost remain aligned in the same accounting period.
• B. Record an accrual for the received material, reconcile it to the later invoice posting, and explain that the apparent favorable CPI is partly a cutoff issue.
• C. Add the full purchase order commitment to AC because it represents the likely subcontract cost exposure.
• D. Report the favorable cost variance as valid because the invoice was received after the September 30 cutoff.

Best answer: B

What this tests: Account Considerations

Explanation: Earned value cost analysis depends on matching actual costs to the work performed through the status date. Here, the material was completed and accepted before September 30, so the late invoice explains why AC is understated. The correct response is to accrue the received goods or services, then reconcile the accrual when the invoice posts. The open commitment is useful for cost exposure and forecasting, but it is not actual cost by itself. EV should not be reduced merely because an invoice is late; EV is based on objective accomplishment criteria. Without the accrual, the CPI would overstate cost efficiency and could mislead management about true cost performance.

The material was received before the status date, so actual cost should include an accrual while excluding the unearned commitment balance.

Question 9

Topic: Account Considerations

At the March 31 status cutoff, a control account manager is reconciling the period report. Use CV = EV - AC and CPI = EV / AC, rounded to two decimals. Which interpretation is supported by the exhibit?

Reconciliation notes:

• Labor performed through March 31 was not yet posted; an accrual of $60,000 is required.

• A supplier invoice in the extract is for material received April 4; exclude $25,000 from March 31 actual cost.

• A. Report AC of $430,000, a favorable CV of $20,000, and CPI of 1.05.

• B. Report adjusted AC of $490,000, an unfavorable CV of $40,000, and CPI of 0.92.

• C. Report adjusted AC of $405,000, a favorable CV of $45,000, and CPI of 1.11.

• D. Report adjusted AC of $465,000, an unfavorable CV of $15,000, and CPI of 0.97.

Best answer: D

What this tests: Account Considerations

Explanation: Actual cost for earned value reporting should reflect costs for work performed through the status cutoff, not merely the preliminary accounting extract. The missing labor cost relates to work performed before March 31, so it should be accrued into the reporting period. The supplier invoice relates to material received after the cutoff, so it should be excluded from March 31 actual cost. The reconciled AC is $430,000 + $60,000 - $25,000 = $465,000. With EV of $450,000, CV = $450,000 - $465,000 = -$15,000, which is unfavorable. CPI = $450,000 / $465,000 = 0.97 when rounded to two decimals.

The reconciled actual cost is $430,000 + $60,000 - $25,000 = $465,000, so CV is -$15,000 and CPI is 0.97.

Question 10

Topic: Account Considerations

A control account includes a procurement-heavy work package for installing prefabricated skid assemblies. The month-end status package contains the following excerpt:

Which interpretation should the EVP analyst use for month-end earned-value reporting?

• A. Report EV of $250,000 for installed and accepted skids; report AC of $406,000 for the accrued receipt and lot charge; treat the remaining purchase order value as a commitment or forecast exposure.
• B. Report EV of $540,000 because the full lot is under purchase order; report AC of $562,000 because the supplier commitment is contractually binding.
• C. Report EV of $250,000 for installed and accepted skids; report AC of $250,000 because only paid cash should be included in actual cost.
• D. Report EV of $350,000 because 70 skids have been received and accepted by receiving inspection; report AC of $406,000 for accrued cost.

Best answer: A

What this tests: Account Considerations

Explanation: For earned-value reporting, procurement events must be classified by what they represent. A purchase order creates a commitment, but it does not by itself create earned progress or actual cost. Material receipt may support accrual accounting, but it is not earned progress unless the work package’s measurement rule says receipt earns value. Here, skid budget is earned only when skids are installed and accepted, so EV is 50 × $5,000 = $250,000. The full lot freight/test budget is not earned because the full lot has not been received and accepted. Actual cost should follow the accounting status: 70 received skids at $5,200 plus $42,000 lot freight/test equals $406,000 accrued AC. Cash paid is not the same as actual cost when accruals are used.

This separates earned progress from receipt, actual cost from cash payment, and commitment from incurred cost.

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Related focused pages

• Free AACE EVP Full-Length Practice Exam
• AACE EVP: Organizing
• AACE EVP: Communication Competency
• AACE EVP: Perform Planning and Scheduling Duties
• AACE EVP: Perform Budgeting Duties
• AACE EVP: Analysis and Management Reports
• AACE EVP: Revisions and Data Maintenance

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