The Variance at Completion (VAC) is a key performance indicator in project management, used to measure the difference between the Budget at Completion (BAC) and the Estimate at Completion (EAC). VAC helps project managers assess whether a project is on track to be completed within the budget or if cost overruns are expected.
Variance at Completion (VAC) Calculator
Understanding the Variance at Completion (VAC) Formula
The Variance at Completion (VAC) is a crucial metric used in project management to measure the difference between the Budget at Completion (BAC) and the Estimate at Completion (EAC). This variance indicates whether the project is expected to finish under or over budget. A positive VAC indicates under budget, while a negative VAC indicates over budget.
Components of the VAC Formula
- Budget at Completion (BAC): The total budget allocated for the project.
- Estimate at Completion (EAC): The forecasted total cost of the project upon completion.
VAC Formula
VAC = BAC – EAC
- BAC: Represents the total budget allocated for the project.
- EAC: Represents the forecasted total cost of the project.
Interpretation of VAC
- Positive VAC: Indicates the project is likely to be completed under budget.
- Negative VAC: Suggests the project will exceed the budget, requiring immediate corrective actions.
Importance of VAC in Project Management
- Cost Forecasting: VAC helps in predicting whether the project will stay within budget.
- Performance Measurement: Provides a quantitative measure of cost performance.
- Decision Making: Assists project managers in making informed decisions regarding budget adjustments and corrective actions.
- Transparency and Accountability: Promotes transparency in cost management.
Example Calculation
Suppose a project has a Budget at Completion (BAC) of $500,000 and an Estimate at Completion (EAC) of $450,000:
VAC = 500,000 – 450,000 VAC = $50,000
This indicates that the project is expected to be completed $50,000 under budget.
