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Earned Value Management Guide

The document defines key terms and formulas used in Earned Value Management for project cost and schedule performance measurement. It includes definitions of Planned Value (PV), Earned Value (EV), Actual Cost (AC), Budget at Completion (BAC), Estimate at Completion (EAC), Estimate to Complete (ETC), Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), and Schedule Performance Index (SPI). It also provides examples of using the metrics and formulas to calculate variances, estimates, and evaluate project performance.

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Juan Auccapiña Guillen
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390 views5 pages

Earned Value Management Guide

The document defines key terms and formulas used in Earned Value Management for project cost and schedule performance measurement. It includes definitions of Planned Value (PV), Earned Value (EV), Actual Cost (AC), Budget at Completion (BAC), Estimate at Completion (EAC), Estimate to Complete (ETC), Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), and Schedule Performance Index (SPI). It also provides examples of using the metrics and formulas to calculate variances, estimates, and evaluate project performance.

Uploaded by

Juan Auccapiña Guillen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Subject: Project Management

COST MANAGEMENT – EXERCISE ‘EARNED VALUE


MANAGEMENT’
Acronym Term Interpretation

PV Planned Value As of today, what is the estimated value of work


planned to be done?
EV Earned Value As of today, what is the estimated value of work
actually accomplished?
AC Actual Cost As of today, what is the actual cost for the work
accomplished?
BAC Budget at Completion How much did we BUDGET for the TOTAL Project
(the budget) effort?
EAC Estimate at Completion What we currently expect the TOTAL project to cost
(a forecast)?
ETC Estimate to Complete From this point on, how much MORE do we expect
it to cost to finish the project (forecast)?

Name Formula Interpretation

Cost • < 0, Over Budget (NOK)


EV - AC
Variance (CV) • >= 0, Under Budget (OK)
Schedule • < 0, Delayed (NOK)
EV - PV
Variance (SV) • >= 0, Ahead of schedule(OK)
Cost • We are getting $ CPI worth of
Performance work
EV / AC
Index (CPI) of every $ 1.00 spent.
• >= 1 OK; < 1 NOK
Schedule • We are progressing at SPI % of
Performance the
EV / PV
Index (SPI) rate originally planned.
• >= 1 OK; < 1 NOK
Subject: Project Management

Name Formula Interpretation

It is used when the original estimate


AC + ETC
was fundamentally flawed.

It is used if no variances from BAC


BAC / CPI have occurred or you will continue
with the same rate of spending.
EAC
Estimate at It is used when current variances are
AC + (BAC
Completion thought to be atypical of the future.
– EV)

AC + It is used when current variances are


[ (BAC – though to be typical of the future.
EV) /
(SPI * CPI) ]

Name Formula Interpretation

ETC EAC – AC How much more will the Project cost?.


Estimate to Reestimate the remaining work from
Completion Reestimate
the bottom up.
Subject: Project Management

1. The Project Team have budgeted $ 3000.00 dollars by work done and at this
moment, they have spent $ 4000.00. If the Team have budgeted $ 5000.00
by planned work. What is Cost Variance (CV) ?.

Solution:

EV = 3000.00 (value budgeted by work done).


AC = 4000.00 (Actual Cost).
PV = 5000.00 (Planned Value, value budgeted by planned work).

CV = EV – AC, then, CV = 3000.00 – 4000.00

Answer. CV = - 1000.00
Subject: Project Management

2. If EAC = $ 5250.00 and BAC = $ 5000.00 What’s the value of Cost Variance
(CV)?.If CPI = 0.90, What is (EV)?

Solution:

EAC = AC + (BAC – EV)

We know that: CV = EV – AC
Replacing: EAC = BAC – CV, then, 5250.00 = 5000.00 – CV

CV = – 250.00

If CPI = 0.90
We know that: CPI = EV / AC, y CV = EV – AC = - 250.00.

From value of CPI: EV = 0.90 AC.

Replacing EV, we have:


0.90 AC – AC = - 250.00, then AC = 2500 y EV = 2250

Answer. EV = 2250.00
Subject: Project Management

3. Your project is running well. In the latest earned value report, you see the CPI
is 1.2, the SPI is 0.8, the PV is $600,000 and the SV is - $120,000. You can’t
find the CV in the report, so you calculate it based on the information given.
What is the CV?

Resolution:

Finding EV

We know that: SV = EV – PV
Replacing: - 120,000 = EV – 600,000

EV = 480,000

Now we need AC, using CPI = 1.2


We know that: CPI = EV / AC, so 1.2 = 480,000/ AC

AC = 400,000

Therefore: CV = EV - AC.

CV = 480,000 – 400,000

Answer. CV = 80,000

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