Cost Variance Calculator
Calculate the difference between the Earned Value (EV) of work performed and the Actual Cost (AC) incurred.
Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC)
- A positive CV indicates the project is **under budget** (favorable).
- A negative CV indicates the project is **over budget** (unfavorable).
- A CV of zero means the project is exactly on budget.
Enter Project Values
Understanding Cost Variance (CV)
What is Cost Variance?
Cost Variance (CV) is a key metric in Earned Value Management (EVM) used to assess the financial performance of a project. It measures the difference between the planned value of the work that has been completed (Earned Value) and the actual cost spent to complete that work.
Cost Variance Formula
The formula is simple and direct:
CV = EV - AC
Where:
- EV (Earned Value): The value of the work physically completed, expressed in terms of the budget authorized for that work.
- AC (Actual Cost): The total cost actually incurred and recorded in accomplishing the work performed during a given time period for a schedule activity or work breakdown structure component.
Interpreting the Result
CV > 0(Positive): The project is performing **under budget**. You spent less than the planned value of the work completed. This is a **favorable** variance.CV < 0(Negative): The project is performing **over budget**. You spent more than the planned value of the work completed. This is an **unfavorable** variance.CV = 0(Zero): The project is performing **on budget**. You spent exactly the planned value of the work completed.
Cost Variance Examples
These examples demonstrate how to calculate and interpret Cost Variance:
Example 1: On Budget Scenario
Scenario: A task was budgeted to cost $100. You have completed 100% of the task, and the actual cost incurred is $100.
1. Known Values: EV = $100, AC = $100
2. Formula: CV = EV - AC
3. Calculation: CV = $100 - $100 = $0
4. Result: CV = $0
Interpretation: The project is exactly on budget for this task.
Example 2: Under Budget (Favorable)
Scenario: A task was budgeted to cost $500. You have completed work valued at $500, but only spent $450.
1. Known Values: EV = $500, AC = $450
2. Formula: CV = EV - AC
3. Calculation: CV = $500 - $450 = $50
4. Result: CV = $50
Interpretation: The project is $50 under budget. This is a favorable variance.
Example 3: Over Budget (Unfavorable)
Scenario: A task was budgeted to cost $1,000. You have completed work valued at $1,000, but actually spent $1,200.
1. Known Values: EV = $1,000, AC = $1,200
2. Formula: CV = EV - AC
3. Calculation: CV = $1,000 - $1,200 = -$200
4. Result: CV = -$200
Interpretation: The project is $200 over budget. This is an unfavorable variance.
Example 4: Partial Work, On Budget
Scenario: A phase is budgeted for $10,000. At the reporting date, you have completed 50% of the planned work (EV = $5,000), and you have spent $5,000 (AC = $5,000).
1. Known Values: EV = $5,000, AC = $5,000
2. Formula: CV = EV - AC
3. Calculation: CV = $5,000 - $5,000 = $0
4. Result: CV = $0
Interpretation: The work completed so far is exactly on budget.
Example 5: Partial Work, Under Budget
Scenario: A task is budgeted for $750. You've completed work worth $400 (EV = $400), and the actual cost is $350 (AC = $350).
1. Known Values: EV = $400, AC = $350
2. Formula: CV = EV - AC
3. Calculation: CV = $400 - $350 = $50
4. Result: CV = $50
Interpretation: The work completed is $50 under budget (favorable).
Example 6: Partial Work, Over Budget
Scenario: A component is budgeted for $2,500. Work valued at $1,500 (EV = $1,500) has been completed, but it cost $1,800 (AC = $1,800).
1. Known Values: EV = $1,500, AC = $1,800
2. Formula: CV = EV - AC
3. Calculation: CV = $1,500 - $1,800 = -$300
4. Result: CV = -$300
Interpretation: The work completed is $300 over budget (unfavorable).
Example 7: Small Task, Favorable
Scenario: A small coding task was planned to cost $200. It's finished (EV = $200) and cost $180 (AC = $180).
1. Known Values: EV = $200, AC = $180
2. Formula: CV = EV - AC
3. Calculation: CV = $200 - $180 = $20
4. Result: CV = $20
Interpretation: The task is $20 under budget (favorable).
Example 8: Large Project Phase, Unfavorable
Scenario: A major project phase has an Earned Value of $50,000 (EV = $50,000) but Actual Costs have reached $65,000 (AC = $65,000).
1. Known Values: EV = $50,000, AC = $65,000
2. Formula: CV = EV - AC
3. Calculation: CV = $50,000 - $65,000 = -$15,000
4. Result: CV = -$15,000
Interpretation: The project phase is $15,000 over budget (significantly unfavorable).
Example 9: Zero Actual Cost (Work Not Started?)
Scenario: At a reporting point, work valued at $0 (EV = $0) has been completed, and $0 has been spent (AC = $0). This indicates no progress or cost yet.
1. Known Values: EV = $0, AC = $0
2. Formula: CV = EV - AC
3. Calculation: CV = $0 - $0 = $0
4. Result: CV = $0
Interpretation: The project is on budget relative to the work completed and cost incurred so far (implies work hasn't started or is just beginning).
Example 10: Zero Earned Value (Cost Incurred, No Value Delivered?)
Scenario: At a reporting point, no work has been completed (EV = $0), but some costs have been incurred, say $300 (AC = $300). This could indicate startup costs or work started but not yet measurable as "earned."
1. Known Values: EV = $0, AC = $300
2. Formula: CV = EV - AC
3. Calculation: CV = $0 - $300 = -$300
4. Result: CV = -$300
Interpretation: The project is $300 over budget relative to the value delivered. This is unfavorable and often indicates a problem with progress relative to spending.
Frequently Asked Questions about Cost Variance
1. What is the main **Cost Variance formula**?
The primary formula is CV = EV - AC, where EV is Earned Value and AC is Actual Cost.
2. What does a positive Cost Variance mean?
A positive CV means that the Earned Value (the value of work completed) is greater than the Actual Cost spent. This indicates that the project is currently under budget, which is a favorable condition.
3. What does a negative Cost Variance mean?
A negative CV means that the Actual Cost spent is greater than the Earned Value. This indicates that the project is currently over budget, which is an unfavorable condition.
4. What does a Cost Variance of zero mean?
A CV of zero means that the Earned Value is exactly equal to the Actual Cost. This indicates that the project is currently on budget.
5. How is Earned Value (EV) determined?
Earned Value is typically calculated by multiplying the percentage of work completed for a task or project phase by the planned budget (Budget at Completion - BAC) for that task or phase. For example, if a $1000 task is 50% complete, the EV is 50% of $1000, which is $500.
6. How is Actual Cost (AC) tracked?
Actual Cost is the direct expense incurred for the work performed. This includes labor costs, material costs, and any other direct expenses associated with completing the specific task or project work package.
7. What is the difference between Cost Variance and Schedule Variance?
Cost Variance (CV = EV - AC) measures the budget performance. Schedule Variance (SV = EV - PV) measures the schedule performance, comparing the value of work completed (EV) to the value of work planned to be completed by this point (Planned Value - PV).
8. Why is monitoring Cost Variance important?
Monitoring CV helps project managers identify cost overruns or underruns early, allowing for timely corrective actions to bring the project back within budget or take advantage of savings.
9. Does a favorable CV (under budget) always mean the project is healthy?
Not necessarily. A favorable CV could indicate efficient spending, but it could also result from scope reduction, lower quality materials/labor, or delays (if work is behind schedule). It's important to analyze CV in conjunction with Schedule Variance (SV) and other project metrics.
10. What actions can be taken if the CV is significantly unfavorable (over budget)?
Actions may include identifying the root causes of cost overruns (e.g., inefficient processes, unexpected expenses, inaccurate estimates), revising estimates for future work, seeking opportunities to reduce costs, or requesting additional budget.
