"“A clay pot sitting in the sun will always be a clay pot. It has to go through the white heat of the furnace to become porcelain.” - Mildred Struven

PMP®:PMI-ACP®:CAPM® - EVM formula - Worked out with Wall example





Cost Variance

CV= EV-AC= 2000-2500 =-$500
(Negative Cost Variance means the project is over budget)


Schedule Variance

SV = EV-PV=2000-3000 = -$1000
(Negative Schedule Variance means the project is behind schedule)


Cost Performance Index

CPI = EV/AC = 2000/2500 = 0.8
(CPI < 1 means the cost performance of the project is not good.
For every $ we spend we are getting the value of $0.8)

Schedule Performance Index
SPI = EV/PV = 2000/3000 = 0.66
(SPI < 1 means the schedule performance of the project is not good.
For every $ we plan , we are completing value of $.66)

EAC formula
A)When original estimate is flawed.
EAC=AC+ETC = 2500+3000 = $5500 (pending work estimate is $3000) 


B)When the current variance will continue in future also.

EAC = BAC/CPI = 4000/0.8 = $5000
(For the 1st 2 feet wall it costed $2500, it would cost the same for the next 2 feet also)


C)When the current variance won't be there in future and pending work will go as per plan.

EAC = AC + (BAC-EV) = 2500+(4000-2000) = $4500
(For the 1st 2 feet wall it costed $2500, but it would cost $2000 for the next 2 feet wall i.e. $1000 per feet as per original budget.) 


D)When both Cost and Schedule constraint influence the pending work.

EAC = AC + [(BAC-EV)/(CPI*SPI)] = 2500+[(4000-2000)/(.8*.66)]=$6287
(Typical Cost variance in future will cost $5000. The schedule will go for 6 days, 3 days for the 1st 2 feet of the wall and 3 more days for the 2nd 2 feet of the wall. What if the schedule constraint of 4 days is insisted? We need to crash the schedule by using additional man power. Hence the additional cost)


Variance At Completion:

VAC=BAC-EAC = 4000-5000=-$1000. 
(EAC calculated as per formula B above.)


To Complete Performance Index:

When BAC was valid
TCPI = Work remaining/funds remaining=(BAC-EV)/(BAC-AC)=(4000-2000)/(4000-2500)=1.33
When BAC is invalid
TCPI = (BAC-EV)/(EAC-AC)=(4000-2000)/(5000-2500)=0.8
(TCPI < 1 means there is not enough fund to complete the pending work)

Read next:
EVM formula animated
EVM in MS Project 2013

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