Sunday, April 19, 2009

Explain Schedule Variance & Cost Variance.

Schedule Variance & Cost Variance

[Try to understand BCWS, ACWP, BCWP and Schedule Variance, Cost Variance will be easy then.]


Budgeted Cost of Work Scheduled (Planned Value)
BCWS or PV: is the dollar value of the work that was "scheduled for completion" by this point in the "project schedule". How much work should have been done so far. At the start of the project you can identify what the BCWS will be at any given time during the project. It does not change.

Budgeted Cost of Work Performed (Earned Value)
BCWP or EV: is the original "estimated cost" for "work actually completed". It is a measure of work actually performed during the status period, but it is planned(budgeted) amount - not its actual cost.

Actual Cost of Work Performed
ACWP: Cost incurred to accomplish the work that has been done to date.

Suppose a project D has 5 tasks where each task takes 1 month and the cost of each task is $100.

You can identify (at the beginning) what the BCWS will be at any time during the project. BCWS DOES NOT change e.g after 3 months you have scheduled 3 tasks to have been completed @ $300 budgeted cost.

You judge the Performance of your project against BCWS and it does not change.

Month 1Task 1$100
Month 2Task 2$200
Month 3Task 3$300
Month 4Task 4$400
Month 5Task 5$500

It is cumulative.

BCWP: It is calculated as you "progress" through your project. If everything in the above example goes as planned then BCWP = BCWS. But if there is some problem and suppose now it takes 2 months instead of one month to complete task 2 then the above table will look like this:

Month 1Task 1$100
Month 2Task 2$200
Month 3Task 2$200
Month 4Task 3$300
Month 5Task 4$400
Month 6Task 5$500

In this above table - by 3rd Month 2 tasks have been completed and your budget for these 2 tasks was $200 so BCWP = $200 but BCWS will be same $300.


Month 1Task 1$100
Month 2Task 2$200
Month 3Task 2$300
Month 4Task 3$400
Month 5Task 4$500
Month 6Task 5$ 600

ACWP at Month 3 is $300. i.e. due to the problems with task 2 you end up a Month late and $100 over budget.

Example 1

Plan: Build 5 sections of railroad track in 5 weeks for $5000.
Performance: After two weeks, one section is completed $2600.

Calculate BCWS, BCWP, ACWP after two weeks.


BCWS $2000
BCWP $1000
ACWP $2600


Example 2

40 cookies per batch
5 batches per hour (200 cookies per hour)
Schedule: 5 hours to make 1000 cookies.
Budgeted cost per cookies - $0.05
= $50

After one hour - we have made:
150 edible cookies, some were burnt, some hit the floor, the kids ate some, and fed some to the dog.
Actual cost of ingredients after one (ACWP) $ = $9.00

Calculate BCWS, BCWP, ACWP after one hour.


BCWS : 10$
BCWP : 7.5$
ACWP : 9$


Once you understand the above examples carefully Schedule Variance and Cost Variance will be very easy to understand.

Cost Variance CV = BCWP - ACWP
+ (Underrun); - (Overrun); 0 (On Budget)

Schedule Variance SV = BCWP - BCWS
+ (Ahead); - (Behind); 0 (On Schedule)

Also See:

Defect Density
Defect Removal Efficiency
Test Coverage
Test Effectiveness
Effort Variance