Cost Variance (CV)
Cost Variance (CV) is an EVM metric that measures cost performance as the difference between earned value and actual cost: CV = EV - AC.
Explanation
Cost Variance indicates whether the project is over or under budget for the work completed. A positive CV means the project has spent less than budgeted for the work accomplished, indicating the project is under budget. A negative CV means the project has spent more than budgeted, indicating it is over budget. A CV of zero means the project is exactly on budget.
The formula is CV = EV - AC. For example, if EV = $45,000 and AC = $50,000, then CV = -$5,000, meaning the project is $5,000 over budget for the work completed.
Unlike SV, CV does not converge to zero at project completion. It remains a valid indicator of cumulative cost performance throughout the entire project and at project close. A negative CV at completion indicates the project finished over budget. CV is considered one of the most important EVM metrics because cost variances are typically difficult to recover from later in the project.
Key Points
- •Formula: CV = EV - AC
- •Positive CV = under budget; negative CV = over budget
- •Does not converge to zero at project completion (unlike SV)
- •Considered a critical indicator because cost overruns are hard to recover
Exam Tip
CV = EV - AC. Positive is good (under budget). Unlike SV, CV remains meaningful at project end. A negative CV at completion means the project finished over budget.
Frequently Asked Questions
Related Topics
Earned Value (EV)
Earned Value (EV) is the measure of work performed expressed in terms of the budget authorized for that work.
Actual Cost (AC)
Actual Cost (AC) is the realized cost incurred for the work performed on an activity during a specific time period.
Cost Performance Index (CPI)
Cost Performance Index (CPI) is an EVM efficiency metric that measures cost performance as the ratio of earned value to actual cost: CPI = EV / AC.
Schedule Variance (SV)
Schedule Variance (SV) is an EVM metric that measures schedule performance as the difference between earned value and planned value: SV = EV - PV.
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