What is the outcome of a negative Cost Variance?

A negative Cost Variance indicates that the actual costs incurred on a project are greater than the planned costs for the work completed up to a certain point. This scenario illustrates that the project is over budget, as it signifies that the expenditure has exceeded what was initially allocated in the budget. Cost Variance is calculated by subtracting the Planned Value (PV) from the Earned Value (EV) — if this result is negative, it clearly shows that the project is facing financial issues, leading to the conclusion that the project is over budget. Understanding this relationship is crucial for effective project management, as it allows project managers to identify fiscal discrepancies early and take corrective action.