When to use it
Use it to investigate cost performance at a common status date.
Do not compare complete earned value with incomplete invoices or accruals.
- 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; AC is actual cost. Both are money on the same basis.
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.
The completed work cost more than its budgeted value. Investigate the cause before extrapolating it.
Common pitfall
Spending less than the planned budget is not necessarily favourable if less work has been delivered.
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.