Cost Variance Calculator
Check whether a project or a production run is costing more than it should. Use earned value for projects, or standard costing to split a factory cost gap into price and usage.
Add planned value for schedule variance and SPI. Add the total budget for a forecast of the final cost.
Standard quantity and hours are what the actual output should have used, for example 5,000 units x 2 kg = 10,000 kg.
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How to calculate cost variance
Cost variance compares what work should have cost with what it actually cost. On a project, subtract actual cost from earned value. In a factory, compare actual cost with standard cost and split the gap into price and quantity.
The budgeted cost of the work actually finished so far. Multiply the total budget by the percentage complete from your project plan or milestone tracker.
Example: 36% of a ₹5 crore budget done = ₹1.8 croreEverything booked to the project up to the same date. Take it from the project cost centre or WBS ledger in your ERP, including accrued but unbilled costs.
Example: spend booked to date = ₹2 croreThe budgeted cost of the work you planned to finish by now. Read it off the baseline schedule. It is only needed for schedule variance and SPI.
Example: plan said 42% done = ₹2.1 croreThe cost per kg of material or per labour hour agreed in your standard cost card. It is set at budget time by costing and procurement.
Example: steel at ₹60 per kg, labour at ₹400 per hourWhat you really paid per unit. Divide purchase invoice value by quantity for material, and payroll cost by hours for labour.
Example: steel bought at ₹62 per kgStandard is what the actual output should have used, from the bill of materials or routing. Actual comes from material issue slips and time sheets.
Example: 5,000 units x 2 kg = 10,000 kg standard, 10,400 kg usedThe labour version of price variance. Paying above the standard rate is adverse.
(Actual rate − Standard rate) × Actual hoursThe labour version of usage variance. Taking more hours than standard is adverse.
(Actual hours − Standard hours) × Standard rateFor costs, a positive result means you spent more than standard, so it is adverse (A). A negative result is favourable (F). On projects, negative CV means over budget.
Cost below standard = F, above = A| Material price: (₹62 − ₹60) × 10,400 kg | ₹20,800 A |
| Material usage: (10,400 − 10,000) × ₹60 | ₹24,000 A |
| Labour rate: (₹380 − ₹400) × 2,600 hrs | ₹52,000 F |
| Labour efficiency: (2,600 − 2,500) × ₹400 | ₹40,000 A |
| Total cost variance | ₹32,800 A |
- Material: actual cost ₹6,44,800 against standard ₹6,00,000 gives ₹44,800 A, which is price ₹20,800 A plus usage ₹24,000 A
- Labour: actual ₹9,88,000 against standard ₹10,00,000 gives ₹12,000 F, which is rate ₹52,000 F less efficiency ₹40,000 A
- Net them off: ₹44,800 A minus ₹12,000 F leaves ₹32,800 A, so the run cost more than standard
- Ask why: cheaper, less skilled labour may explain both the rate saving and the extra hours and scrap
How to read CV, CPI and each variance
A single number rarely tells the full story. Use this table to read the result, then look at which component is driving it.
| Measure | Result | What it means |
|---|---|---|
| Cost variance (CV) | Above 0 | Under budget: the work done cost less than its budget |
| Cost variance (CV) | Below 0 | Over budget: you are paying more than planned for the work done |
| CPI | Above 1.00 | Each rupee spent earns more than a rupee of planned work |
| CPI | Below 0.95 | Most project teams treat this as a warning that needs a recovery plan |
| SPI | Below 1.00 | Behind schedule: less work done than planned by this date |
| Price or rate variance | Positive | Adverse: paid more per kg or per hour than standard |
| Usage or efficiency variance | Positive | Adverse: used more material or hours than the output needed |
Thresholds such as CPI 0.95 are common practice, not a rule. Set your own tolerance in your variance policy.
Get a one-page report with your inputs, each variance marked favourable or adverse, and the total.
How to act on a cost variance
The calculation is the easy part. The value comes from finding the owner of each variance and fixing the cause before the next close.
Price variances usually belong to procurement, usage and efficiency to production. Split the number so the right person explains it.
A favourable price on cheaper material often shows up as adverse usage through scrap. Judge the pair together.
If the same variance appears every month, the standard may be out of date rather than the plant being inefficient.
Investigate only variances above an agreed amount and percentage, so the team spends time where it matters.
On long projects, CPI rarely recovers once it drops early. Watch it monthly and re-forecast EAC when it slips.
A short commentary for each material variance makes month-end reviews faster. A flux analysis report gives that commentary a consistent shape.
Frequently asked questions
On a project, cost variance is earned value minus actual cost. If work worth ₹1.8 crore of budget has cost ₹2 crore, CV is minus ₹20 lakh, so you are over budget. In standard costing, cost variance is actual cost minus standard cost for the actual output, split into price and usage parts.
On a project using CV = EV minus AC, negative is bad because you are over budget. In standard costing formulas written as actual minus standard, a negative number is good because you spent less than standard. That is why this calculator labels every result favourable or adverse in words.
CPI is earned value divided by actual cost. A CPI of 0.90 means you get 90 paise of planned work for every rupee spent. Dividing the total budget by CPI gives a simple estimate of the final cost at completion.
Cost variance compares earned value with actual cost, so it shows whether you are spending efficiently. Schedule variance compares earned value with planned value, so it shows whether you are ahead of or behind plan. A project can be under budget and late at the same time.
Price variance captures paying more or less per unit than standard, valued on the actual quantity. Usage variance captures using more or less material than the output needed, valued at the standard price. Together they add up to the total material cost variance.
Many companies calculate price variance when material is bought, using quantity purchased, so it is spotted early. This calculator uses quantity used for both, which keeps price and usage adding up to the total. If you buy and use different amounts, enter quantity purchased in a separate run for the price variance.
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