When to use it
Use it as a cost-efficiency indicator where actual cost and completion measures are reliable.
The ratio is undefined when actual cost is zero. Do not turn missing cost data into a zero-cost success.
- Define the scope, status date and units before collecting the inputs.
- Substitute the values into the formula and retain their units.
- Interpret the result against the assumptions and decide what evidence or action is needed next.
Formula & inputs
EV is earned value and AC is actual cost; AC must be greater than zero.
Worked example
A delivery project has budget at completion of €900,000. At the same status date, planned value is €450,000, earned value is €360,000 and actual cost is €400,000. All values use the same scope and price basis.
Each euro spent has earned less than a euro of budgeted work. A forecast using this ratio assumes that the same pattern continues.
Common pitfall
The ratio can be distorted by timing differences between crediting work and recognising cost.
Source & related material
Standard quantitative technique; this explanation is by fannarmaximus. No single inventor is claimed. The arithmetic is computed from explicit inputs, not copied from an official sample question.