1. What is Cost Variance?

Cost Variance (CV) is a financial metric that measures the difference between the budgeted cost and the actual cost of a project or activity. It helps in assessing whether a project is over or under budget.

2. How Does the Calculator Work?

The calculator uses the Cost Variance formula:

Where:

• \( Budgeted\ Cost \) — The planned or estimated cost (USD)
• \( Actual\ Cost \) — The real cost incurred (USD)

Explanation: A positive CV indicates the project is under budget, while a negative CV means the project is over budget.

3. Importance of Cost Variance Calculation

Details: Calculating Cost Variance is crucial for project management, budget control, financial planning, and identifying areas where cost efficiencies can be improved.

4. Using the Calculator

Tips: Enter both budgeted cost and actual cost in USD. All values must be valid non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive Cost Variance mean?
A: A positive CV indicates that the actual costs are less than the budgeted costs, meaning the project is under budget.

Q2: What does a negative Cost Variance mean?
A: A negative CV indicates that the actual costs exceed the budgeted costs, meaning the project is over budget.

Q3: How often should Cost Variance be calculated?
A: Cost Variance should be calculated regularly throughout the project lifecycle to monitor budget performance and make necessary adjustments.

Q4: Are there limitations to Cost Variance analysis?
A: While useful, CV doesn't provide information about schedule performance and should be used alongside other metrics like Schedule Variance for comprehensive project analysis.

Q5: Can Cost Variance be used in personal finance?
A: Yes, individuals can use Cost Variance principles to compare their budgeted expenses with actual spending to improve personal financial management.