Cost Variance (CV) and Schedule Variance (SV) are indicators of how closely accomplished work is on budget and on schedule. The formula for CV = EV – AC and the formula for SV = EV – PV. Both of these formulas begin with Earned Value (EV), which is the value of the work already accomplished. The actual amount of money spent is represented by Actual Cost (AC). Planned Value (PV) is how much we estimate the value to be of the work that we’re planning to do. Another way of thinking about PV is the amount of money we’ve budgeted for the work scheduled at that point in time. If CV is negative, the project is over budget; if CV is positive, the project is under budget. If SV is negative, the project is behind schedule; is SV is positive, the project is ahead of schedule.

Here is an example: Carl’s car re-design project has a total budget of $4 million to be spent evenly throughout the one year scheduled to complete the project. The project is now one-fourth completed. So far they have actually spent $2 million, and they have only worked two full months on the project.

**What is the AC?** It’s 2 million dollars, because that is how much they have actually spent.

**What is the EV?** It’s 1 million dollars, because 1/4 of the work is done, and 1/4 of the $4 million budget is $1 million.

**What is the PV?** It’s 2/3 million dollars. There is $4 million to spend evenly over 12 months, so every month they were budgeted to spend 1/3 of one million dollars. They have worked 2 months, so they had planned to spend 2/3 million dollars at this point.

**What is the CV? **-$1 million. CV = EV – AC = $1 million – $2 million = -$1 million. The CV is negative, meaning that they are $1 million over budget at this point.

**What is the SV? **1/3 million dollars. SV = EV – PV = $1 million – $2/3 million = $1/3 million. The SV is positive, meaning that the project is ahead of schedule.

Also see the earlier postings of Earned Value Management – Step 1 (February 26, 2009), Earned Value Management AC and BAC – Step 2 (March 2, 2009), and Earned Value Management – Planned Value – Step 3 (posted March 11, 2009).

*PMP Exam, Project Management*

November 9th, 2013 → 3:26 pm

[…] Also see the earlier postings of Earned Value Management – Step 1, Earned Value Management AC and BAC – Step 2 Earned Value Management – Planned Value – Step 3 and Earned Value Management – CV and SV […]