How is the cost variance for a project calculated?

The calculation of cost variance for a project is a key component in project management that assesses the financial performance of the project. Cost variance specifically indicates the difference between what has been earned in terms of work performed and what has been spent.

To find cost variance, you measure the difference between earned value and actual cost. Earned value represents the value of work actually completed at a certain point in time, while actual cost reflects the total costs incurred for that work. By subtracting actual cost from earned value, you can determine whether the project is under or over budget. If the result is positive, the project is under budget and performing well; if it's negative, the project is over budget.

This understanding of cost variance is critical for effective project management, allowing project managers to track performance and make necessary adjustments to keep the project on financial track.