Variance Analysis: CV, SV, VAC on the PMP Exam

Variance Analysis: Reading the Numbers That Matter

Variance analysis is how project managers translate earned value data into actionable insights. On the PMP exam, variance questions test whether you can calculate variances, interpret their meaning, and recommend appropriate responses. The three key variances — Cost Variance (CV), Schedule Variance (SV), and Variance at Completion (VAC) — each tell a different part of the project performance story.

Cost Variance (CV)

Formula: CV = EV − AC

Cost Variance measures the difference between the value of work completed and the money spent to complete it. It answers: "Are we over or under budget for the work we have done?"

CV > 0: Under budget — you spent less than the value of work completed.
CV = 0: Exactly on budget.
CV < 0: Over budget — you spent more than the value of work completed.

Example: EV = $150,000, AC = $165,000. CV = $150,000 − $165,000 = −$15,000. The project is $15,000 over budget.

Schedule Variance (SV)

Formula: SV = EV − PV

Schedule Variance measures the difference between the value of work completed and the value of work that was planned to be completed by now. Despite its name, SV is expressed in dollars, not time.

SV > 0: Ahead of schedule — more work completed than planned.
SV = 0: Exactly on schedule.
SV < 0: Behind schedule — less work completed than planned.

Example: EV = $150,000, PV = $175,000. SV = $150,000 − $175,000 = −$25,000. The project is behind by $25,000 of planned work.

Variance at Completion (VAC)

Formula: VAC = BAC − EAC

VAC predicts the total budget variance when the project finishes. Unlike CV, which looks at performance to date, VAC looks at the entire project.

VAC > 0: The project is forecast to finish under budget.
VAC = 0: The project is forecast to finish exactly on budget.
VAC < 0: The project is forecast to finish over budget.

Example: BAC = $500,000, EAC = $540,000. VAC = $500,000 − $540,000 = −$40,000. The project is forecast to exceed the budget by $40,000.

Interpreting Variances Together

The real exam skill is interpreting multiple variances simultaneously:

CV negative, SV negative: Over budget and behind schedule. The project is in serious trouble and requires immediate corrective action. Consider fast-tracking, crashing, or scope reduction.
CV negative, SV positive: Over budget but ahead of schedule. The team might be spending extra money to accelerate. Verify whether this is intentional (authorized crashing) or an efficiency problem.
CV positive, SV negative: Under budget but behind schedule. Resources may be underutilized. Consider reallocating budget to add resources and recover the schedule.
CV positive, SV positive: Under budget and ahead of schedule. Ideal scenario, but verify the data — sometimes this indicates scope was reduced or quality shortcuts taken.

Variance Thresholds and Reporting

The project management plan typically defines variance thresholds that trigger corrective action. Common thresholds include:

CV or SV exceeding ±10% of the planned value
CPI or SPI falling below 0.90 or above 1.10
VAC exceeding a predefined dollar amount

When thresholds are breached, the project manager must analyze root causes, develop corrective actions, and update forecasts. The PMP exam tests whether you know the appropriate next steps, not just the calculation.

Quick Memory Aid

All variance formulas follow the same pattern: what we got minus what we spent or planned. Positive is always good. EV always comes first in CV and SV. BAC comes first in VAC because it is the "goal."

Practice variance calculations and interpretation with our EVM topic module, or create your free account for timed practice exams that mirror the real PMP.