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It is important to discuss and ensure a clear understanding of which rule (or rules) you plan to use when measuring and reporting EVM with the team to minimize any confusion
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7: Project Cost Management
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PV EV AC BAC EAC ETC VAC
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Planned Value Earned Value Actual Cost Budget at Completion Estimate at Completion Estimate to Complete Variance at Completion
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As of today, what is the estimated value of the work planned to be done As of today, what is the estimated value of the work actually accomplished As of today, what is the actual cost incurred for the work accomplished How much did we budget for the total project What do we currently expect the total project to cost (a forecast) From this point on, how much more do we expect it to cost to finish the project (a forecast) As of today, how much over or under budget do we expect to be at the end of the project
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EVM Terms and Interpretations
Earned Value Formulas
You should be familiar with several formulas (especially if you are planning to take the PMP or PMI Scheduling exam) to enable yourself and the team to effectively perform and understand EVM You should also be familiar with the definition or interpretation of each of the key components of EVM, as detailed in Tables 7-5 and 7-6[5]
How to Remember the EVM Formulas
A few tips are going around the PM world concerning how to remember the EVM formulas They are as follows:
Variances are always minus For example, EV minus ( ) either cost (AC) or schedule (PV) Indexes (CPI, SPI and TCPI) are always divide Think I = divide EV is almost always first in the formula (the exceptions are EAC, ETC, and VAC)
PMP Certification: A Beginner s Guide
Name
Schedule Variance (SV) Cost Variance (CV) Schedule Performance Index (SPI) Cost Performance Index (CPI)
Formula
SV = EV PV
Interpretation and Tips
Ahead or behind schedule Minus (negative) is behind schedule, and plus (positive) is ahead of schedule (good) Ahead or behind budget Minus (negative) is over budget (bad), and plus (positive) is under budget (good) The project is currently progressing at _____% of the rate originally planned (Note: < 10 is good) Currently getting $_____ worth of work out of every dollar spent Budget is or is not being spent wisely (> 10 is good) CPI is an index showing the efficiency of the utilization of the resources on the project Projection of cost performance needed to achieve the original budget Note: If the resultant number is higher than 10, the chances of getting back to the original budget (BAC) is extremely difficult How much more do we expect the project to cost from this point forward At this time, how much do you expect the total project to cost (See the formulas to the left and below) This formula calculates actual plus a new estimate for the remaining work Used if no variances from BAC have occurred or if you plan to continue at the same spend (burn) rate Actual cost plus the new estimate to complete remaining work Used when original estimate is not appropriate Actual to date plus remaining budget Used when current variances are thought to be atypical (it is essentially AC plus the remaining value of work to be performed) Actual to date plus remaining budget modified by performance Used when current variances are thought to be typical (representative) of the future EAC is the manager s projection of total cost of the project at completion How much over or under budget do we expect to be at the end of the project
CV = EV AC
SPI = EV PV CPI = EV AC
To-Complete Performance Index
TCPI = (BAC EV) (BAC AC)
Estimate to Complete (ETC) Estimate at Completion (EAC)
ETC = EAC AC There are several ways to calculate EAC, depending on the assumptions made EAC = AC + Bottom-up ETC Note: This formula is most often asked for on the exam BAC EAC = Cumulative CPI EAC = AC + ETC
EAC = AC + (BAC EV)
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