Finding the Cost Variance

Let's say your project has a BAC of $500,000 and you're 40 percent complete. You have spent, however, $234,000 in real monies. To find the cost variance, we'll find the earned value, which is 40 percent of the $500,000 budget. As Figure 7-7 shows, this is $200,000. In this example, you spent $234,000 in actual costs. The formula for finding the cost variance is earned value minus actual costs. In this instance, the cost variance is negative $34,000.

This means you've spent $34,000 dollars more than what the work you've done is worth. Of course, the $34,000 is in relation to the size of the project. On this project, that's a sizeable flaw, but on a billion-dollar project, $34,000 may not mean too much. On either project, a $34,000 cost variance would likely spur a cost variance report (sometimes called an exceptions report).

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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