What is the purpose of calculating Cost Variance?

Calculating Cost Variance (CV) serves the primary purpose of determining whether a project is adhering to its budget expectations. This metric compares the planned budgeted cost of work that has been completed to the actual costs incurred for that work. A positive cost variance indicates that a project is under budget, while a negative variance indicates that it is over budget.

Understanding cost variance is critical for project management because it allows managers to identify financial discrepancies early, making it easier to implement corrective measures if needed. Essentially, by focusing on this metric, stakeholders can effectively gauge the financial health of a project and ensure it remains financially viable throughout its lifecycle. This analytical approach helps in maintaining control over project resources and expenditures, ensuring that the project remains aligned with its financial goals.