EVM - Cost Variance

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

CV 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.
  • Positive CV indicates the project is under-budget.
  • Negative CV 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.
  • Positive Variance % indicates % under budget
  • Negative Variance % indicates % over budget.

Cost Performance Indicator

Cost Performance Indicator (CPI) is an index showing the efficiency of the utilization of the resources on the project. CPI 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.

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

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

To Complete Cost Performance Indicator

To Complete Cost Performance Indicator (TCPI) is an index showing the efficiency at which the resources on the project should be utilized for the remainder of the project. It 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.

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

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

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