Cost Variance - AcqNotes

Definition: Cost variance is the difference between the actual cost incurred and the planned/budgeted cost at a given time on a project. Cost ... SkiptocontentAdvertisementsCostVariance(CV)indicateshowmuchoverorunderbudgettheprojectis.Itisusedtotrackexpenselineitems,butcanalsobetrackedattheprojectlevel,aslongasthereisabudgetallocatedtotheitem. CVisusedbytheProgramManagerandprogrampersonneltodeterminehowbesttoutilizetheirremainingresources.AdvertisementsDefinition:Costvarianceisthedifferencebetweentheactualcostincurredandtheplanned/budgetedcostatagiventimeonaproject.CostVariance(CV)ResultsTheCostVarianceOutcomesinEarnedValueManagement(EVM)are:Positive:UnderbudgetNegative:Overbudget.Zero:Onbudget.EVMSGoldCard:DAUEVMGoldCard20204CostVariance(CV)MethodsTherearefour(4)differentCVmethodsusedinEVM.AdvertisementsCostVarianceCostVariance%CostPerformanceIndicator(CPI)ToCompleteCostPerformanceIndicator(TCPI)1.CostVariance(CV)CostVariancecanbecalculatedusingthefollowingformulas:CostVariance(CV)=EarnedValue(EV)–ActualCost(AC)CostVariance(CV)=BCWP–ACWPCostVarianceindicateshowmuchoverorunderbudgettheprojectisintermsofpercentage.AdvertisementsPositive=indicateshowmuch underbudgettheprojectNegative=indicateshowmuch overbudgettheproject2.CostVariance%CostVariance%canbecalculatedasusingthefollowingformula:CV%=CostVariance(CV)/EarnedValue(EV)CV%=CV/BCWPCostVariance%indicateshowmuchoverorunderbudgettheprojectisintermsofpercentage.AdvertisementsPositive%=indicateshowmuch underbudgettheprojectisintermsofpercentageNegative%=indicateshowmuch overbudgettheprojectisintermsofpercentage3.CostPerformanceIndicator(CPI)CostPerformanceIndicatorcanbecalculatedusingthefollowingformulas:CPI=EarnedValue(EV)/ActualCost(AC)CPI=BCWP/ACWPCPIisanindexshowingtheefficiencyoftheutilizationoftheresourcesontheproject.AdvertisementsGreaterthan(≥)1:indicatesefficiencyinutilizingtheresourcesallocatedtotheprojectisgood.Lessthan(≤)1:indicatesefficiencyinutilizingtheresourcesallocatedtotheprojectisnotgood.4.ToCompleteCostPerformanceIndicator(TCPI) ToCompleteCostPerformanceIndicator(TCPI)canbecalculatedusingthefollowingformulas:TCPI=(TotalBudget–EV)/(TotalBudget–AC)TCPI=(TotalBudget–BCWP)/(TotalBudget–ACWP)TCPIisanindexshowingtheefficiencyatwhichtheresourcesontheprojectshouldbeutilizedfortheremainderoftheproject.Iftheresultsare:AdvertisementsGreaterthan(≥)1:indicatesutilizationoftheprojectteamfortheremainderoftheprojectcanbestringent.Lessthan(≤)1:indicatesutilizationoftheprojectteamfortheremainderoftheprojectshouldbelenient.CostVariance(CV)ExampleAnexampleofaCVisifacompanyhadactualpurchaseexpensesforJuneof$1000butthebudgetedamountforJunewas$600.Thecompanyhadacostvarianceof$400.ThisisanunfavorableCVbecausetheactualcostismorethanthebudgetedamount.EVMDefinitions–BCWP=BudgetedCostofWorkPerformed–ACWP=ActualCostofWorkPerformed–AC=ActualCostAdvertisementsAcqNotesTutorialAcqLinksandReferences:DefenseAcquisitionGuidebook(DAG)DoDEarnedValueManagementInterpretationGuide–Jan2018EVMContractRequirementsChecklistDAUEVMGoldCard–2020DOEEVMSGoldCard–Feb2019Updated:6/2/2021Rank:G3LeaveaReplyCancelreplyYoumustbeloggedintopostacomment.AdvertisementsreportthisadAdvertisementsxx