---
title: "Variance analysis"
subject: "ICT Project Management"
chapter: 9
key: "semester_7/ict_project_management:variance-analysis"
source: https://www.bctengineer.com/q/semester_7/ict_project_management/variance-analysis
site: BCT Engineering
---

# Variance analysis

ICT Project Management · Chapter 9: Project Cost Management

- Asked in: year not given
- Video: [Earned Value Management Made Easy: Learn EVM in 11 Minutes with a Road Trip](https://www.youtube.com/watch?v=vyT2YrgHHJo) — PM Aspirant
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/ict_project_management/variance-analysis
- Whole chapter: https://www.bctengineer.com/md/semester_7/ict_project_management/chapter-9

## Question

What do you mean by variance analysis?

## Short answer

Variance analysis compares actual performance (cost, schedule) against baselines, computing cost variance (EV minus AC) and schedule variance (EV minus PV). Positive CV indicates under budget, positive SV ahead of schedule. It identifies causes and triggers corrective actions.

## Answer

**Variance analysis** is the technique of comparing the actual results of the project with the planned (baseline) values to find the difference (variance), determine the cause and decide on corrective action. It is used in scope, schedule and cost control, and is a central part of earned value management.

#### Types of variance
1. **Cost variance (CV)** = EV − AC (or Budget − Actual).
2. **Schedule variance (SV)** = EV − PV.
3. **Scope variance**: difference between the baseline scope and delivered scope.
4. **Time variance**: planned versus actual dates.
5. **Variance at completion (VAC)** = BAC − EAC.

Interpretation:
| Value | Cost | Schedule |
|---|---|---|
| Positive | Under budget | Ahead of schedule |
| Zero | On budget | On schedule |
| Negative | Over budget | Behind schedule |

Percentage variance: CV% = CV/EV × 100.

#### Steps
1. Establish the baseline.
2. Measure actual performance.
3. Calculate the variances.
4. Investigate the **cause** (poor estimate, scope change, productivity, price changes).
5. Decide if the variance is within **threshold** (e.g. ±10%).
6. Recommend corrective/preventive action or change request.
7. Report and update the forecasts.

#### Example
Planned cost of design = Rs 2,00,000, EV = Rs 1,80,000, AC = Rs 2,20,000.
CV = 1,80,000 − 2,20,000 = −40,000, so over budget by Rs 40,000 (−22%). CPI = 0.82.

```text
Baseline --compare--> Actual --> Variance
   Variance > threshold? -> Cause -> Action
```

#### Importance
Gives early warning, supports decisions and improves estimates for future projects. Variance without cause analysis is not useful.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. In variance analysis, how is cost variance (CV) calculated?
   A. AC - EV
   B. EV - PV
   C. EV - AC
   D. BAC - EAC
   Answer: C. CV = EV - AC; a negative value means over budget. (Key point: Cost variance formula)

2. Which formula gives schedule variance (SV)?
   A. EV - PV
   B. EV - AC
   C. PV - EV
   D. AC - PV
   Answer: A. SV = EV - PV; positive means ahead of schedule. (Key point: Schedule variance formula)

3. A project has a negative cost variance and a positive schedule variance. What does this mean?
   A. Under budget and behind schedule
   B. Over budget but ahead of schedule
   C. Over budget and behind schedule
   D. On budget and on schedule
   Answer: B. Negative CV is over budget; positive SV is ahead of schedule. (Key point: Interpretation)

4. Planned cost Rs 2,00,000, EV = Rs 1,80,000, AC = Rs 2,20,000. What is the cost variance?
   A. +Rs 40,000 (under budget)
   B. -Rs 20,000 (over budget)
   C. +Rs 20,000 (under budget)
   D. -Rs 40,000 (over budget)
   Answer: D. CV = 1,80,000 - 2,20,000 = -40,000, so the project is over budget. (Key point: Example calculation)

## Related in ICT Project Management

- [Stakeholder analysis and types](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Astakeholder-analysis) — ICT Project Management, chapter 7

## Related in other subjects

- [Cost variance analysis from standard and actual](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Acost-variance-analysis-9000-units) — Engineering Economics, chapter 1
- [Variance analysis, 9,300 vs 10,500 units](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Avariance-production-9300-units) — Engineering Economics, chapter 1
- [Fixed overhead cost variance from standard card](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Afixed-overhead-variance-standard-card) — Engineering Economics, chapter 1
- [Rate analysis: meaning, purposes, factors](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Arate-analysis-purposes-factors) — Estimating and Costing, chapter 4, asked 4×