The suggested answer is B.
Schedule variance (SV) is calculated using the formula SV = EV - PV, where EV is the Earned Value and PV is the Planned Value. Given that the project budget is $778,000 and the project should be 50% complete at the end of the second quarter, the Planned Value (PV) is 50% of $778,000, which is $389,000. The Earned Value (EV) is 40% of $778,000, which is $311,200. The schedule variance (SV) would therefore be $311,200 - $389,000, which equals -$77,800, indicating the project is behind schedule.