Essential Mathematical Formulas for PMP Certification Test
A = B + C
Example
Assume you’re organizing a birthday party. You expected that the overall cost would be $500, but as the preparations advance, you discover that you’ve spent more than you anticipated.
– Estimated/Budgeted Cost: $500
– The actual cost was $600.
Cost Variance (CV) is calculated as follows:[CV = Actual Cost – Budgeted Cost]
As a result, in this case:[CV = $600 – $500 = $100 \]
The cost difference (CV) is $100. A positive CV implies that the project cost more than expected, whereas a negative CV suggests that it cost less than expected.
In this case, the celebration cost $100 more than was originally intended. Cost variance informs project managers if they are over or under budget and by how much, allowing them to take the appropriate measures to properly control costs.
