What is schedule variance?

Asked By: Janira Batanete | Last Updated: 3rd May, 2020
Category: personal finance financial planning
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Schedule variance is an indicator of whether a project schedule is ahead or behind and is typically used within Earned Value Management (EVM). Schedule Variance can be calculated by subtracting the Budgeted Cost of Work Scheduled (BCWS) from the Budgeted Cost of Work Performed (BCWP).

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Similarly, what is schedule variance and cost variance?

Cost variance shows deviation of spent cost and the expected cost. Schedule variance shows the deviation in time consumed and the estimated time. Cost variance is the difference of earned value and actual cost. Schedule variance is the difference of earned value and planned value. CV = EV - AC.

Similarly, what does it mean if schedule variance is negative? A positive schedule variance means the project is ahead of schedule, while a negative schedule variance means that a project is behind schedule. A value of zero indicates that a project is going as planned and on schedule. Let's see these formulas in action.

Similarly, what is variance cost?

A cost variance is the difference between the cost actually incurred and the budgeted or planned amount of cost that should have been incurred. These variances form a standard part of many management reporting systems.

What is cost variance in project management?

It is a process of evaluating the financial performance of your project. Cost variance compares your budget set before the project started and what was actually spent. This is calculated by finding the difference between BCWP (Budgeted Cost of Work Performed) and ACWP (Actual Cost of Work Performed).

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What are the types of variance?

Types of Variance Analysis
  • Material Variance.
  • Labour Variance.
  • Variable Overhead Variance.
  • Fixed Overhead Variance.
  • Sales Variance.

Why is schedule variance important?

Schedule Variance helps to understand if you are behind or ahead of schedule. Cost Variance helps determine if you are under or over budget. Variance analysis is the key to the success of any project, which is finished on time and within the approved budget.

How do you create a schedule variance?

Schedule Variance can be calculated as using the following formula:
  1. Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)
  2. Schedule Variance (SV) = BCWP – BCWS.

How is performance schedule measured?

The schedule performance index (SPI) is a measure of how close the project is to being completed compared to the schedule. As a ratio it is calculated by dividing the budgeted cost of work performed, or earned value, by the planned value.

How do you calculate time variance?

A time variance is the difference between the standard hours and actual hours assigned to a job. The concept is used in standard costing to identify inefficiencies in a production process. The variance is then multiplied by the standard cost per hour to quantify the monetary value of the variance.

What is a cost schedule?

A cost schedule is a table showing the total costs of production at different levels of output and from which marginal costs and average costs can be calculated and cost curves drawn.

What is the formula for cost variance?

Cost Variance can be calculated as using the following formulas: Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC) Cost Variance (CV) = BCWP – ACWP.

What is variance in statistics?

In probability theory and statistics, variance is the expectation of the squared deviation of a random variable from its mean. Informally, it measures how far a set of (random) numbers are spread out from their average value.

Is variance negative or positive?

Negative Versus Positive Variances
Cost variances may be either positive or negative figures. Negative figures happen if you spend more on a project than you allowed in your budget. Positive figures result if you spend less on a project than the budget predicted.

Should variance be positive or negative?

Understanding Expense Variances
An expense or expenditure variance is the difference between a budgeted expense and the actual amount. The variance is positive or negative, depending on whether an expense is less or more than budgeted.

Which type of variance is worse?

Performing budget to actual variance analysis
Variances fall into two major categories: Favorable variance: Actuals came in better than the measure it is compared to. Negative variance: Actuals came in worse than the measure it is compared to.

What is F and U in accounting?

In common use favorable variance is denoted by the letter F - usually in parentheses (F). When actual results are worse than expected results given variance is described as adverse variance, or unfavourable variance. In common use adverse variance is denoted by the letter U or the letter A - usually in parentheses (A).

What is performance variance?

Definition: Variance can be defined as the difference between the budgeted or expected cost or income for an activity and the actual costs or income for the activity. A favourable variance is achieved when the actual performance is better than the expected results.

Is variance budget minus actual or actual minus budget?

Budget variance. A budget variance is the difference between the budgeted or baseline amount of expense or revenue, and the actual amount. The budget variance is favorable when the actual revenue is higher than the budget or when the actual expense is less than the budget.

What is the purpose of using standard costs?

Standard Costing System. In accounting, a standard costing system is a tool for planning budgets, managing and controlling costs, and evaluating cost management performance. A standard costing system involves estimating the required costs of a production process.

What does a negative SV mean?

In other words, it is the dollar value of the difference between the work scheduled for completion in a specified period and the work actually completed. A negative schedule variance means that a project is behind schedule, while a negative variance means that it is ahead of schedule.

What is the difference between SV and CV?

Cost Variance (CV): This is the completed work cost when compared to the planned cost. Cost Variance is computed by calculating the difference between the earned value and the actual cost, i.e. EV – AC. Schedule Variance (SV): This is the completed work when compared to the planned schedule.