How to Calculate Cost Variance for a Project (Formula Included)

How to Calculate Cost Variance for a Project (Formula Included)

Project managers check in on progress and compare it to the project plan to avoid cost overrun. To understand project cost variance, it is important to be familiar with the main types of project costs, which can contribute to overall cost variance. These costs come in many forms, from the cost of materials to simply the cost of doing business. It is the project manager's job to take all of these costs into account and create a flexible budget. Cost variance (CV) is the difference between project costs estimated during the planning phase and the actual costs.

It is how project managers track expenses to see if a project is under or over budget. EVM is a technique used to establish whether a variance is positive, negative or zero. If a variance is extremely high (negative), changes need to be made, while if there is an extremely low cost variance (positive) or zero variance, it is a sign of effective cost management.