How is cost variance (CV) calculated in project management?

Cost variance (CV) is a critical metric in project management that measures the difference between what has been earned through completed work and what has been spent to achieve that work. It is calculated by taking the actual cost (AC) incurred for the work completed and comparing it to the earned value (EV), which represents the budgeted value of the work that has actually been performed.

In this context, the correct method for calculating cost variance is by subtracting the earned value (EV) from the actual cost (AC). This calculation tells project managers how much over or under budget the project is at a given point in time. A positive CV indicates the project is under budget, while a negative CV suggests it is over budget. This information is vital for making informed decisions regarding project adjustments and resource allocations.

The other methods listed do not provide an accurate calculation of cost variance. For instance, adding EV to planned value (PV) does not relate directly to cost performance, and multiplying actual cost (AC) by project duration does not yield meaningful insights into cost variance. Comparing planned value (PV) to actual cost (AC) focuses on cost performance but does not reflect the actual progress in terms of completed work, hence it does not provide the precise calculation for CV