A new approach to calculating project cost variance

A new approach to calculating project cost variance is presented in this paper. The computation of project cost variance usually begins with the cost breakdown structure and uses the simulation method to estimate the variance of a project cost. However, the decomposition of the activities of a project is based on the work breakdown structure, not on the cost breakdown structure. To overcome this limitation, this paper assumes the time and cost of a project to be random and correlative and thereby constructs a computation approach to integrating the time and cost. This approach is capable of calculating the project cost variance and activity cost variances, and also provides an effective way to measure the logical dependency on the cost variance of each activity. Therefore, a better financial plan of a project can be made for a contractor.