Chapter 10 Answer Key
10.1: Earned Value Inputs
Earned Value Input Table
| Term | Description | Calculation |
| PV | Planned Value (Also known as BCWS – Budgeted Cost of the Work Scheduled) | PV = Planned value of the work that is scheduled in our current baseline |
| BAC | Budgeted cost at completion | BAC=TOTAL PV for Project |
| AC | Actual Costs (Also known as ACWP – Actual Cost of the Work Performed) | AC= Actual Costs (Total of all invoices, labor, parts, etc) |
| EV | Earned Value (Also known as BCWP – Budgeted Cost of the Work Performed) | EV= Total Planned Value of Activity or Project * % Complete |
Earning Rules Table
| Term | Description/Calculation |
| Professional Estimator | Used when activity is long (80-90 days) or very complex |
| 0/100 Rule | No earned value is counted for an activity until it is 100% complete |
| 50/50 Rule | Percent complete calculated at fifty percent when activity starts. Remaining 50% is calculated when activity is complete |
| 25/75 Rule | Percent complete calculated at twenty-five percent when activity starts. Remaining 75% is calculated when activity is complete |
| 20/80 Rule | Percent complete calculated at twenty percent when activity starts. Remaining 80% is calculated when activity is complete |
Questions: Earned Value Inputs
1. $7,800
2. $0.00
3. Accounting Department
4. Time-Phased Budget
5. Professional Estimator or An Earning Rule
6. $61,900
7. $27,300
8. $15,000
9. $25,000
10.2 Earned Value Analysis
Earned Value Calculations Tables
| Cost Variance | |
| Term | Description/Calculation |
| CV | Cost Variance: Compares budgeted costs to the actual amount spent. |
| CV = EV – AC | |
| Negative number = over budget. | |
| Positive number = under budget. | |
| Schedule Variance | |
| Term | Description/Calculation |
| SV | Schedule Variance: Compares the work that should have been done at this time, to the amount actually completed. |
| SV = EV – PV (Note: PV at this point in time, not total PV for activity.) |
|
| Negative number = work scheduled to be complete at this time is not done. | |
| Positive number = work NOT yet scheduled to be complete at this time has been done | |
| Note: When a task or project is complete, its SV will equal 0, regardless of whether the project is completed late or early. Therefore SV is useful when a task is underway or when the bulk of the project work is being performed. Project managers should also use the baseline schedule when making judgements about project schedule performance. | |
| Cost Performance Indexes | |
| Term | Description/Calculation |
| CPI | Cost Performance Index: Measures how effectively we are using our budget. |
| CPI = EV / AC |
|
| CPI < 1 : Over Budget | |
| CPI = 1 : On Budget | |
| CPI > 1 : Under Budget | |
| Schedule Performance Index | |
| Term | Description/Calculation |
| SPI | Schedule Performance Index: Measures how efficiently we are completing the scheduled work |
| SPI = EV / PV (Note: PV at this point in time, not total PV for activity) |
|
| SPI < 1 : Behind Schedule | |
| SPI = 1 : On Schedule | |
| SPI > 1 : Ahead of schedule | |
| Note: When a task or project is complete, its SPI will equal 1, regardless of whether the project is completed late or early. Therefore SPI is useful when a task is underway or when the bulk of the project work is being performed. Project Managers should also use the baseline schedule when making judgements about project schedule performance. | |
| Forecasting | |
| Term | Description/Calculation |
| ETC * | Estimate to Complete: What the remaining work will cost if our current CPI holds |
| ETC= (BAC – EV) / CPI or ETC= (BAC – EV) / (EV / AC ) | |
| EAC * | Estimate cost At Completion: What the project will cost if our current CPI holds |
| EAC = AC + ETC | |
| VAC * | Variance At Completion |
| VAC = BAC – EAC | |
| * If our baseline is inaccurate, or if we have reason to believe that CPI will not remain the same, ETC, EAC, and VAC may be based on revised estimates (sometimes referred to as ETCre, EACre, and VACre respectively). | |
| Percent Complete | |
| Term | Description/Calculation |
| PCIB | Percent Complete Index—Budget |
| PCIB = EV / BAC | |
| The percentage of work that is complete based on baseline budget. Use this if we trust our initial project baseline. | |
| PCIC | Percent Complete Index—Cost |
| PCIC = AC / EACre | |
| The percentage of work that is complete based on revised estimate of the project costs. Used if we have to revise baseline, are using rolling wave planning, etc. | |
| To Complete Performance Index | |
| Term | Description/Calculation |
| TCPI | To Complete Performance Index |
| TCPI = (BAC – EV) / (BAC – AC) | |
| TCPI < 1 : More Budget than Work Left | |
| TCPI = 1 : Right amount of remaining Budget for remaining work. | |
| TCPI > 1 : More Work than Budget Left | |
Questions: Earned Value
1.
CV= EV-AC
SV = EV-PV
CV= $80,000 – $80,000 = $0
SV= $80,000 – $100,000 = -$20,000
Budget is on target and project is behind schedule.
2.
CV= EV-AC
SV = EV-PV
CV= $130,000 – $120,000 = $10,000
SV= $130,000 – $100,000 = $30,000
Under budget and project is ahead of schedule.
3A.
AC = $8,000
EV = 30% * Total PV For Activity A
EV = 30% * $40,000 = $12,000
PV at the end of Week 1 = $10,000
CV = $12,000 – $8,000 = $4,000
SV = $12,000 – $10,000 = $2,000
Under budget and project is ahead of schedule.
3B.
AC = $35,000
EV = 60% * Total PV For Activity A
EV = 60% * $40,000 = $24,000
PV at the end of Week 1 = $30,000
CV = $24,000 – $35,000 = -$11,000
SV = $24,000 – $30,000 = -$6,000
Over budget and project is behind schedule.
4A.
Remember that for cost calculations we don’t need to know PV at a certain time or month, so the information in the question about “at the end of Month 4” is irrelevant.
To Calculate EAC, we first need to calculate ETC:
ETC = (BAC – EV) / CPI or ETC = (BAC – EV) / (EV / AC )
ETC = ( $175,000 – $60,000) / ($60,000 / $45,000 )
ETC = $115,000 / 1.33 = $86,466
EAC = ETC + AC
EAC = $86,466 + $45,000 = $131,466
4B.
FYI: Since the CPI we calculated in part one above was greater than 1 (1.33),
then we know that the TCPI will be less than 1.
TCPI = (BAC – EV) / (BAC – AC)
TCPI = ($175,000 – $60,000) / ($175,000 – $45,000)
TCPI = $115,000 / $130,000 = 0.88
Matching: Earned Value
B – Also known as Budgeted Cost of the Work Scheduled (BCWS)
C – PV for the Activity × Percentage Complete
G – The total planned cost of the project
A – Also known as Actual Cost of the Work Performed (ACWP)
C – Also known as Budgeted Cost of Work Performed (BCWP)
K – EV – PV
D – Percent complete is calculated at fifty percent when activity starts. Remaining 50% is added when activity is complete
H – This performance index uses money to measure time
F – EV- AC
I – A CPI that is _____ 1 means that the cost of completing the work is higher than planned
J – A SPI that is ______ 1 means that the project is ahead of schedule
E – What our project will cost if things keep going as they have up to this point
Exercise: Earned Value
1. BAC is the total PV for the project, in this case $150,300.
2. Month 5
3. Month 8
4.
| Task | Percent Complete | End of Month 3 | ||||||
| EV | AC | PV | CV | SV | CPI | SPI | ||
| A | 100% | $8,000 | $8,400 | $8,000 | -$400 | $0 | 0.95 | 1.00 |
| B | 50% | $9,000 | $10,000 | $12,000 | -$1,000 | -$3,000 | 0.90 | 0.75 |
| C | 33% | $2,277 | $2,000 | $2,300 | $277 | -$23 | 1.14 | 0.99 |
| D | 20% | $5,000 | $3,500 | $5,000 | $1,500 | $0 | 1.43 | 1.00 |
| I | 100% | $31,200 | $35,000 | $23,400 | -$3,800 | $7,800 | 0.89 | 1.33 |
| L | 10% | $960 | $1,000 | $2,400 | -$40 | -$1,440 | 0.96 | 0.40 |
| Cumulative Totals | $56,437 | $59,900 | $53,100 | -$3,463 | $3,337 | |||
| End of Month 3 | |
| CPI | 0.94 |
| SPI | 1.06 |
| TCPI | 1.04 |
| PCIB | 37.55% |
How is this project doing in terms of cost?
Slightly over-budget. Several activities are over budget but some are under budget, so it appears that the entire budget has been under-estimated.
How is this project doing in terms of schedule?
Slightly ahead of schedule.
If everything keeps going as well as it has to this point in terms of cost, what will be the cost to complete the remaining work?
ETC = (BAC – EV) / CPI or ETC = (BAC – EV) / (EV / AC )
ETC = ($150,300 – $56,437) / 0.94
= $93,863 / 0.94
= $99,854
If everything keeps going as well as it has to this point in terms of cost, what will be the final cost of the project?
EAC = AC + ETC
EAC = $59,900 + $99,854
= $159,754
