Job cost variance definition
In agency project management, job cost variance refers to the difference between the budgeted or estimated cost of a project and the actual cost incurred during its execution. This metric helps agencies determine how well they are adhering to their financial plans and whether corrective actions are required. A positive variance indicates that the project is under budget, while a negative variance signals that it's over budget. Monitoring job cost variance is crucial for agencies as it provides insights into financial performance, identifies potential issues early on, and ensures that client work remains profitable.
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Cost variance formula
As well as understanding its significance, it's equally important to know how to calculate job cost variance. The formula for cost variance in project management is straightforward:
Cost Variance (CV) = Earned Value (EV) − Actual Cost (AC)
Where:
Earned Value (EV) represents the value of the work that has been accomplished up to a specific point in time.
Actual Cost (AC) is the real expenditure for the work completed during the same time frame.
By calculating CV, agencies using platforms like Teamwork.com can quickly determine whether a project is running under or over its budgeted costs and take necessary actions accordingly.
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