Cost Variance (CV) in Project Management
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How to calculate and interpret CV as it is used in earned value analysis in project management. Download additional slides, videos, and resources at https://www.christiansonjs.com/ Signup for The Free-Range Technologist, a monthly newsletter filled with creative commons resources, useful apps, and lifehacks: https://mailchi.mp/f8f0219bc305/jscott
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Cost Variance (CV) in Project Management
- 2. Earned Value Analysis • Cost Variance • CV = EV - AC • Negative is bad • Positive is good
- 3. Creating a Time-Phased BudgetTask Activity Budget (PV) Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Design prototype board $468 $78 $390 Order Sensors $156 $156 BreadBoard Sensors and connections $546 $234 $312 Outline programming requirements $390 $78 $312 Draft Preliminary Program $1,092 $78 $390 $390 $234 Load program and test $156 $156 Setup "Real" Twitter Account $39 $39 Develop Final Test Criteria $78 $78 Test $780 $78 $390 $312 Put into Case $39 $39 Complete Perm Install $156 $78 $78 Write up Details and Post $234 $234 Week Total $234 $1,326 $1,014 $702 $546 $312 Cumulative $234 $1,560 $2,574 $3,276 $3,822 $4,134 $0.00 $1,250.00 $2,500.00 $3,750.00 $5,000.00 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Planned Value at this time in the project = $2574 Today
- 4. Actual Costs (AC) AC = $3,000
- 5. Percent of work complete 50% Earned Value Project Total PV = $4,134 EV= Total PV for Project or Activity X % Complete Today = End of Week Three
- 6. Percent of work complete 50% Earned Value EV= 4,134 X 50% = $2,067 Project Total PV = $4,134
- 7. $0.00 $1,250.00 $2,500.00 $3,750.00 $5,000.00 0 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 PV AC EV
- 8. $0.00 $1,250.00 $2,500.00 $3,750.00 $5,000.00 0 Week 1 Week 2 Week 3 PV AC EV CV=EV-AC CV=$2,067-$3000 CV= -$933
- 9. Indexes to Monitor Progress
Editor's Notes
- Earned value analysis has a long history, dating back to the 1930s, but it was not until the 1980s and 1990s that it became a common methodology in project management. EVA uses some basic information about our project to assess our current status and forecast future progress and final project costs and schedule. It is based on four main datapoints: the time-phased budget of our project, the current date, the percentage of work that is completed, and actual costs to complete that work. All this magic starts with our final project schedule and setting our project baseline.
- The time-phased baseline of the value of the work scheduled. An approved cost estimate of the resources scheduled in a time-phased cumulative baseline (BCWS—budgeted cost of the work scheduled).
- The actual cost of the work completed. The sum of the costs incurred in accomplishing work. (ACWP—actual cost of the work performed).
- And overall as a project we have 50% of the work complete:
- And overall as a project we have 50% of the work complete:
- The time-phased baseline of the value of the work scheduled. An approved cost estimate of the resources scheduled in a time-phased cumulative baseline (BCWS—budgeted cost of the work scheduled).
- The time-phased baseline of the value of the work scheduled. An approved cost estimate of the resources scheduled in a time-phased cumulative baseline (BCWS—budgeted cost of the work scheduled).