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CV Ev - Ac: Interpretation of Cost Variance (CV)

Cost variance is the difference between actual costs and budgeted costs, and indicates whether a project is over or under budget. Schedule variance is the difference between earned value and planned value, and indicates whether a project is ahead of or behind schedule. The relationships between cost variance and schedule variance can provide more information about the project's status. This example shows a project that is behind schedule and over budget, with negative cost and schedule variances.

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89 views3 pages

CV Ev - Ac: Interpretation of Cost Variance (CV)

Cost variance is the difference between actual costs and budgeted costs, and indicates whether a project is over or under budget. Schedule variance is the difference between earned value and planned value, and indicates whether a project is ahead of or behind schedule. The relationships between cost variance and schedule variance can provide more information about the project's status. This example shows a project that is behind schedule and over budget, with negative cost and schedule variances.

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zainab isa
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Cost Variance (CV) :

 is also known as budget variance as it deals with the budget of the software
development.

 Cost variance is the difference of the actual cost and the budgeted cost or in other
words it is difference between what was expected to be spent and what was actually
spent.

 The difference between the earned value and the actual cost is known as Cost Variance.

CV = EV – AC
Interpretation of Cost Variance (CV):
1.If CV is negative, the task is over budget.
2.If CV is zero, the task is on budget.
3.If CV is positive, the task is under budget.
Schedule Variance (SV):Schedule variance is basically used to indicate whether a project is
running ahead or behind. It is the difference of Budgeted Cost of Work Performed (BCWP) and
Budgeted Cost of Work Scheduled (BCWS). Schedule variance is computed by calculating the
difference between Earned Value and Planned Value.

SV = EV - PV
Interpretation of Schedule variance (SV):
1.If SV is negative, the project is behind schedule.
2.If SV is zero, the project is right on schedule.
3.If SV is positive, the project is ahead of schedule.

relation of SV and CV:


SV and CV are positive: The project is ahead of schedule and it is under budget.
SV is positive and CV is negative: The project is ahead of schedule and it is over budget. In other
words we can say that the tasks performed are over budget but more of them have been
performed before scheduled.
SV is negative and CV is positive: The project is behind schedule and it is under budget.
In other words we can say that the tasks performed were efficient but more of them should
have been performed earlier.
SV and CV are negative: The project is behind schedule and it is over budget.

Actual Cost = 20,000 BD

Planned Value = 20% * 150,000 = 30,000 BD

Earned Value
Percent Actual * Task Budget = 12.5% *150,000 = 18,750 BD

Cost Variance (CV):


Earned Value – Actual Cost = 18,750 - 20,000 = -1,250

Schedule Variance (SV):


Earned Value - Planned Value = 18,750 - 30,000 = -11,250

Estimate at Completion = (Budget at Completion) / (Cost Performance Index (EV / AC))

Cost Performance Index =EV / AC Estimate at Completion (EAC) = BAC / CPI


=18,750 / 20,000 =150,000/0.9375
=0.9375 =160,000

 The project is performing worse than planned because Estimate at


Completion (EAC)exceeds task budget.

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