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Cost Variance

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Cost Variance (CV) is a very important factor to measure project performance. Cost Variance (CV) indicates how much over or under budget the project is.

Cost Variance can be calculated using the following formula:

  Cost Variance (CV) = Earned Value (EV) - Actual Cost (AC)

OR

  Cost Variance (CV) = BCWP - ACWP

  • The formula mentioned above gives the variance in terms of cost which will indicate how less or more cost has been used to complete the work as of date.

  • Positive Cost Variance Indicates the project is under budget.

  • Negative Cost Variance Indicates the project is over budget.

Cost Variance %

Cost Variance % indicates how much over or under budget the project is in terms of percentage.

Cost Variance % can be calculated using the following formula:

  CV % = Cost Variance (CV) / Earned Value (EV)

OR

  CV % = CV / BCWP

  • The formula mentioned above gives the variance in terms of percentage which will indicate how much less or more money has been used to complete the work as planned in terms of percentage.

  • Positive Variance % indicates % under Budget.

  • Negative Variance % indicates % over Budget.

Cost Performance Indicator (CPI)

Cost Performance Indicator is an index showing the efficiency of the utilization of the resources on the project. Cost Performance Indicator can be calculated using the following formula:

  CPI = Earned Value (EV) / Actual Cost (AC)

OR

  CPI = BCWP / ACWP

  • The formula mentioned above gives the efficiency of the utilization of the resources allocated to the project.

  • CPI value above 1 indicates efficiency in utilizing the resources allocated to the project is good.

  • CPI value below 1 indicates efficiency in utilizing the resources allocated to the project is not good.

To Complete Cost Performance Indicator (TCPI)

To complete Cost Performance Indicator is an index showing the efficiency at which the resources on the project should be utilized for the remainder of the project. This can be calculated using the following formula:

  TCPI = ( Total Budget - EV ) / ( Total Budget - AC )

OR

  TCPI = ( Total Budget - BCWP ) / ( Total Budget - ACWP )

  • The formula mentioned above gives the efficiency at which the project team should be utilized for the remainder of the project.

  • TCPI value above 1 indicates utilization of the project team for the remainder of the project can be stringent.

  • TCPI value below 1 indicates utilization of the project team for the remainder of the project should be lenient.



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