Cost Variance (CV)
Difference between budgeted and actual cost of work performed (Earned Value methodology)
What is Cost Variance (CV)?
Cost variance is the difference between the value of the work done and what it actually cost. It shows, in money terms, whether a project is ahead of or behind its budget.
A negative figure means the project has spent more than the value earned, so it is over budget.
How this KPI is measured
- Function
- Strategy & Projects
- Sub-function
- Cost Control
- Industry
- Construction & Engineering
- Type
- Lagging
- Impact
- Financial control
- Unit
- $
- Measurement frequency
- Monthly
- Formula
- Earned Value − Actual Cost (negative = over budget)
How to calculate it
Subtract actual cost from earned value.
For example, if earned value is 800,000 and actual cost is 1,000,000, cost variance is -200,000, meaning the project is 200,000 over budget for the work done.
Earned value is the budgeted cost of the work actually completed. Report it regularly and use it to forecast the final cost.
Where it is used
Tracking budget performance
See over or under spend in money.
Forecasting final cost
Estimate the outturn.
Reporting to sponsors
Give a clear cost position.
How to improve it
Tips and common mistakes
- Negative means over budget.
- Use with cost performance index.
- Progress measurement is the most important input.
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