Cost Variance (CV): it is used to check if the project is under budget, over budget, or on budget as of today.
Cost variance (CV) = Earned Value (EV) - Actual cost (AC)
if CV is positive (EV > AC) then the project is under budget.
if CV is negative (EV < AC) then the project is over budget.
if CV = 0 (EV = AC) then the project is on budget.
for a very well managed and monitored project, CV should be zero or very close to zero. if CV is either positive or negative, the project manager needs to investigate the reason behind that cost variance from what was planned. being over budget could mean that there are some requirements that were not fulfilled such as installation cost that was not included, material invoices that was not paid, etc.
Example of cost variance calculation: You are the project manager of constructing new robotic cow milking plant. The project is budgeted for $1,600,000 and scheduled to finish within 8 months. As of today, the estimated value for the work accomplished is $900,000 and the actual cost of the project is $1,100,000. what is the cost variance (CV) of your project?
The Answer is $300,000 over budget.
CV = EV - AC
CV = $900,000 - $1,100,000
CV = - $300,000 and the project is over budget
Cost variance (CV) = Earned Value (EV) - Actual cost (AC)
if CV is positive (EV > AC) then the project is under budget.
if CV is negative (EV < AC) then the project is over budget.
if CV = 0 (EV = AC) then the project is on budget.
for a very well managed and monitored project, CV should be zero or very close to zero. if CV is either positive or negative, the project manager needs to investigate the reason behind that cost variance from what was planned. being over budget could mean that there are some requirements that were not fulfilled such as installation cost that was not included, material invoices that was not paid, etc.
Example of cost variance calculation: You are the project manager of constructing new robotic cow milking plant. The project is budgeted for $1,600,000 and scheduled to finish within 8 months. As of today, the estimated value for the work accomplished is $900,000 and the actual cost of the project is $1,100,000. what is the cost variance (CV) of your project?
The Answer is $300,000 over budget.
CV = EV - AC
CV = $900,000 - $1,100,000
CV = - $300,000 and the project is over budget