Cost Variance (CV) is an Earned Value Management metric that tells you whether your project is over or under budget at a given point in time. The formula is CV = EV − AC — Earned Value minus Actual Cost. A positive CV means under budget (you have spent less than the value of work completed). A negative CV means over budget (you have spent more than the value of work completed). A CV of zero means you are exactly on budget. CV is expressed in currency, not as a ratio — it tells you the absolute monetary variance, not the efficiency rate (that is the job of CPI).
You are halfway through a project. You have spent £60,000. Your project is scheduled to have cost £55,000 at this point. But how much work have you actually completed? If you have only delivered £48,000 worth of output, you are £12,000 over budget — even though your team has been busy. If you have delivered £65,000 worth of output, you are actually £5,000 under budget despite spending more than planned.
This is exactly what Cost Variance measures — and why it is more useful than simply comparing planned spend to actual spend. CV tells you the variance between the value of work completed and the cost of completing it. Without the earned value component, you cannot tell whether a budget overspend reflects a real cost problem or simply work being done faster than planned.
This guide covers the CV formula, how to calculate it, how to interpret positive and negative values, how it works alongside CPI, and — most importantly — what to do when your CV is negative.
The Cost Variance Formula — CV = EV − AC
Result is expressed in currency (£, $, €)
How EV Is Calculated
Earned Value is the piece that trips most people up. AC is straightforward — it is your actual spend from the accounts. But EV requires you to measure how much of the planned work is actually complete and multiply that by the budgeted cost of that work:
EV = % Complete × Budget at Completion (BAC)
For example, if a task has a BAC of £20,000 and is 60% complete, the EV is £12,000. This is the value you have earned — what the work done so far was budgeted to cost, regardless of what you actually spent on it.
How to Interpret Cost Variance — Positive, Zero and Negative
EV > AC — you have completed more work value than you have spent to complete it.
This means the project is currently running under budget. It is generally good news, but investigate why:
- Are resources genuinely more efficient than planned?
- Has scope been cut or quality reduced without being reported?
- Are invoices delayed — will they arrive later and flip CV negative?
- Is the % complete over-estimated, meaning EV is inflated?
Action: Verify the % complete estimates are accurate. Report the positive variance to the sponsor. Do not immediately release the budget saving — wait until the trend is confirmed.
EV = AC — the value of work completed equals what you spent to complete it.
The project is performing exactly as budgeted. This is the ideal state — though in practice it is rare, as most projects show some variance in either direction.
- Verify this is real performance, not averaging out of two variances
- Some tasks over-budget, some under-budget, netting to zero is a warning sign — it means individual tasks are off plan even if the total looks fine
Action: Break down by work package to check for hidden variances that are cancelling each other out.
EV < AC — you have spent more than the value of work completed.
The project is over budget. The size of the negative CV tells you how many currency units you have overspent for the work done to date. This requires investigation and action:
- Which work packages are driving the variance?
- Is it a rate variance (resources cost more than planned) or efficiency variance (tasks taking more effort)?
- Is it likely to continue or was it a one-off?
- Will the contingency reserve cover it?
Action: Identify root cause. Forecast final cost (EAC). Report to sponsor. Assess whether contingency is sufficient or a change request is needed.
Cost Variance Worked Example — With Real Numbers
Here is a realistic worked example showing CV calculation across multiple work packages, and how to interpret the results at both work package and project level.
Project Baseline
| Detail | Value |
|---|---|
| Budget at Completion (BAC) | £120,000 |
| Planned Value at Week 10 (PV) | £65,000 |
| Planned % complete at Week 10 | 54% |
Work Package Performance at Week 10
| Work Package | BAC | % Complete | EV (BAC × %) | Actual Cost (AC) | CV (EV − AC) | Status |
|---|---|---|---|---|---|---|
| Strategy & Planning | £18,000 | 100% | £18,000 | £16,500 | +£1,500 | Under budget |
| Content Creation | £35,000 | 80% | £28,000 | £31,200 | −£3,200 | Over budget |
| Paid Media Setup | £22,000 | 60% | £13,200 | £12,800 | +£400 | On budget |
| Analytics & Tracking | £15,000 | 40% | £6,000 | £8,400 | −£2,400 | Over budget |
| Reporting Framework | £30,000 | 10% | £3,000 | £2,100 | +£900 | Under budget |
Project-Level Summary at Week 10
| Metric | Calculation | Value | Meaning |
|---|---|---|---|
| Total EV | Sum of all work package EVs | £68,200 | Value of work completed to date |
| Total AC | Sum of all actual costs | £71,000 | Money actually spent to date |
| Project CV | EV − AC = £68,200 − £71,000 | −£2,800 | Project is £2,800 over budget for work done |
| CPI | EV ÷ AC = £68,200 ÷ £71,000 | 0.96 | For every £1 spent, only £0.96 of value is delivered |
| EAC (forecast) | BAC ÷ CPI = £120,000 ÷ 0.96 | £125,000 | Project forecast to finish £5,000 over budget if trend continues |
Cost Variance vs Cost Performance Index — How They Work Together
CV and CPI both measure cost performance, but they answer different questions. You need both to fully understand your project's cost health.
Formula: CV = EV − AC
Answers: How many pounds/dollars are we over or under budget?
Unit: Currency (£, $, €)
Use for:
- Reporting the absolute budget variance to stakeholders
- Identifying which work packages are over or under by how much
- Calculating how much of the contingency reserve has been consumed
- Deciding whether to raise a change request for additional budget
Limitation: Does not tell you the efficiency rate — a large project will always have a large absolute CV even if the efficiency is fine.
Formula: CPI = EV ÷ AC
Answers: For every £1 we spend, how much value do we get?
Unit: Ratio (e.g. 0.92 or 1.08)
Use for:
- Forecasting the final project cost (EAC = BAC ÷ CPI)
- Comparing cost efficiency across projects of different sizes
- Identifying whether an efficiency problem is structural or one-off
- Setting recovery targets (CPI must reach X to hit budget)
Limitation: A ratio alone does not tell you the monetary impact — a CPI of 0.95 on a £10k project is trivial; on a £10m project it is a £500k problem.
What to Do When Cost Variance Is Negative
A negative CV is not a reason to panic — it is a signal to investigate. Here is a structured response process.
Where CV Fits in the Full EVM Framework
CV is one of ten EVM metrics. Here is how it relates to the others — use the free EVM calculator to compute all ten simultaneously.
| Metric | Formula | What It Measures | Good Value |
|---|---|---|---|
| CV — Cost Variance | EV − AC | Absolute budget variance in currency | Positive (> 0) |
| SV — Schedule Variance | EV − PV | Absolute schedule variance in currency | Positive (> 0) |
| CPI — Cost Performance Index | EV ÷ AC | Cost efficiency ratio — value per £ spent | ≥ 1.0 |
| SPI — Schedule Performance Index | EV ÷ PV | Schedule efficiency ratio — value vs plan | ≥ 1.0 |
| EAC — Estimate at Completion | BAC ÷ CPI | Forecast final project cost | ≤ BAC |
| ETC — Estimate to Complete | EAC − AC | Remaining forecast cost to finish | Context dependent |
| VAC — Variance at Completion | BAC − EAC | Forecast final budget surplus/deficit | Positive (> 0) |
| TCPI — To-Complete Performance Index | (BAC−EV) ÷ (BAC−AC) | Efficiency needed on remaining work to hit BAC | ≤ 1.0 |
Calculate CV and All EVM Metrics Instantly
Enter your PV, EV, AC and BAC — get CV, CPI, SPI, EAC, ETC, VAC and TCPI in seconds. Free, no signup.
Cost Variance on the PMP Exam — What You Need to Know
CV is a guaranteed fixture of the PMP exam. Here is exactly how it is tested and the traps candidates most commonly fall into.
The Key Rules the Exam Tests
- CV = EV − AC — always EV first, then subtract AC. Not AC − EV.
- Positive CV = under budget — good. If you spend less than the value delivered, you are efficient.
- Negative CV = over budget — bad. You spent more than the value delivered.
- CV is currency, CPI is a ratio — CV tells you how much, CPI tells you how efficiently.
- CV does not tell you if you are ahead or behind schedule — that is SV (Schedule Variance = EV − PV).
Classic PMP Exam Scenario
"A project has a BAC of $200,000. At the status date, $90,000 has been spent and the team has completed 40% of the work. What is the Cost Variance?"
Working:
- EV = 40% × $200,000 = $80,000
- AC = $90,000 (given)
- CV = EV − AC = $80,000 − $90,000 = −$10,000
The project is $10,000 over budget. The team has spent $90,000 but only delivered $80,000 of value.