Budget at completion (BAC): is simply the total budgeted cost of the project.

Actual cost (AC): is the expenditures spent thus far or at a specific point in time on the project. In example, actual cost at the
end of month three is $95,000
Planned value (PV): is how much work was expected to be completed. PV = Planned % Complete x BAC; in example, PV =
80% x $110,000 = $88,000
Earned value (EV): is how much work has actually been completed. EV = Actual % Complete x BAC; in example, EV = 75% x
$110,000 = $82,500
Cost variance (CV): shows how the actual cost of the project is comparing to the value of work completed; CV = EV - AC; CV=
$82,500 - $95,000 = (-$12,500), negative cost variance shows us that our sample project is running over budget.
Schedule variance (SV): shows how well the actual work performed compares to the planned schedule; SV = EV - PV; SV =
$82,500 - $88,000 = (-$5,500), negative schedule variance shows that the amount of work actually completed is running
behind what was scheduled to be completed.
Is your project behind or ahead of schedule?
Schedule Performance Index SPI:
If you want to know whether youre ahead of or behind schedule, use SPIs.
The key to using this is that when youre ahead of schedule, youve earned more value than planned! So EV will be bigger than
PV. SPI = EV / PV
Schedule Variance (SV):
So, if you want to know how much ahead or behind schedule you are, just subtract PV from EV.......SV = EV - PV
Are you over budget?
Cost Performance Index (CPI): If you want to know whether youre over or under budget, use CPI.
CPI = EV / AC
Cost Variance (CV): if you want to know how much under or over budget you are, just take AC away from EV
CV = EV AC

Cost performance index (CPI): shows how much work is being completed on the project for every unit of cost spent. A CPI of
below one indicates that the project work is costing more than expected while a CPI of above one means the project work is
being completed at a lesser cost than original expected;
CPI = EV / AC ; CPI = $82,500 / $95,000 = 0.868 ; For every $1 in
cost, our sample project is earning only $0.87 in work output.
Schedule performance index (SPI): shows how close actual work is being completed compared to the schedule. It's similar to
the CPI in that a SPI of below one means that the project work is going slower than expected while a SPI greater than one
means that project work is being completed faster than originally expected;
SPI = EV / PV = $82,500 / $88,000 = 0.938 ; For every hour we originally estimated, our project team is actually completing
only 0.94 hours.
Estimate at completion (EAC): formula forecasts the total cost of the project based on current project performance.
EAC = BAC / CPI; EAC = $110,000 / 0.868 = $126,728.11, this tells us that when our project is completed, its total cost will be
just under $127,000
Estimate to complete (ETC): formula forecasts how much more money will be required to finish the project
ETC = EAC AC; ETC = $126,728.11 - 95,000 = $31,728.11, Based on current performance, our project is going to take just
under $32,000 to get it finished
Variance at completion (VAC): The variance at completion (VAR) predicts what the difference between the budgeted project
cost and actual project cost will be at the conclusion of the project. A negative variance indicates a budget overrun while a
positive variance indicates that the project is expected to come in under budget. VAR = BAC - EAC; VAR = $110,000 $126,728.11 = (-$16,728.11), Based on current performance, our project will run about $17,000 over budget.
To-complete performance index (TCPI): tells us what performance must be achieved to meet either the budget at
completion or estimate at completion. Have you ever wondered halfway through a project just how much youd have to cut
costs in order to get it in within your budget? This number represents a target that your CPI would have to hit in order to hit
your forecasted completion cost.
If youre performing within budgeted cost, itll be based on your BAC.
If youre running over budget, youll have to estimate a new EAC and base your TCPI on that.

There are two different formulas for TCPI. One is for when youre trying to get your project within your original budget, and
the other is for when you are trying to get your project done within the Estimate at Completion youve determined from
Earned Value Calculations.
When youre looking at the TCPI for a project, a higher number means its time to take a stricter cost management
approach. The higher the number, the more youre going to have to rein in spending on your project and cut costs. When the
number is lower than one, you know youre well within your budget and you can relax a bit.
The formula for TCPI to meet the BAC is: TCPI = (BAC EV) / (BAC AC)
TCPI = ($110,000 - $82,500) / ($110,000 - $95,000) = $27,500 / $15,000 = 1.83
The formula for TCPI to meet the EAC is: TCPI = (BAC EV) / (EAC AC)
TCPI = ($110,000 - $82,500) / ($126,728.11 - $95,000) = $27,500 / $31,728.11 = 0.867
You can tell if your project is ahead of schedule or under budget by looking for larger numbers.
A project thats behind schedule or over budget will have lower numbers.
Qs:
What will the total cost of the project be at completion? EAC
How much more money will it take to finish the project? ETC
How much over or under budget will the total project cost be? VAR
How much work was expected to be finished at this point in time? PV
How much work has actually been completed at this point in time? EV
How much more or less has the completed work cost compared to what was planned? CV
How much more or less work has been accomplished compared to what was planned? SV

How much is the work being completed costing compared to what was planned? CPI
How does the work being completed compare to what was planned in the schedule? SPI
What level of performance must future project work meet in order to meet the budget? TCPI based on BAC
What level of performance must future project meet in order to meet the projects cost based on past performance? TCPI based
on EAC

Case study of the earned value formulas:

4-month project: Total budget $110,000. -- BAC
Project cost at end of month three: $95,000 -- AC
Estimated work complete at end of month three: 80% -- PV%
Actual work complete at end month three: 75% -- AC%
Core formulas:
Budget at completion (BAC): is total budgeted cost of the project, in above example it is $110,000.
Actual Cost (AC): is the expenditures spent thus far or at a specific point in time on the project. There is no formula for
actual cost. AC = $95,000
Planned Value (PV): This is how much of your budget you planned on using so far. PV = Planned % Complete x BAC; =
80% x $110, 000 = $88,000
Earned Value (EV): This figure tells you how much your project actually earned so far. EV = Actual % Complete x BAC; =
75% x $110, 000 = $82,500
Is your project behind or ahead of schedule?
o Schedule performance index (SPI):If you want to know whether youre ahead of or behind schedule, use SPIs.; SPI
= EV / PV
o Schedule variance (SV): How much ahead or behind schedule you are.SV = EV PV; 82,500 - 88,000 = ($5, 500)
Are you over budget?
o Cost performance index (CPI): if you want to know whether youre over or under budget, use CPI. CPI=EV/AC;
82,500 / 95,000 = 0.868;
o Cost variance (CV): How much above or below your budget you are. CV = EV AC; 82,500 - 95,000 = ($12, 500)
o Cumulative cost performance index (CPIC) provides a more accurate overall performance index for the project
based on earlier CPI measurements. CPIC = EVC / ACC
Forecast what your project will look like when its done:
o Estimate at completion (EAC) formula forecasts the total cost of the project based on current project performance;
EAC = BAC / CPI
o Estimate to complete (ETC) formula forecasts how much more money will be required to finish the project; ETC =
EAC AC
o Variance at completion (VAC) predicts what the difference between the budgeted project cost and actual project
cost will be at the conclusion of the project; VAC = BAC EAC

To-complete performance index (TCPI) tells you how well your project will need to perform to stay on budget. If
youre performing within your budgeted cost, itll be based on your BAC. If youre running over your budget, youll
have to estimate a new EAC and base your TCPI on that.
Formula for TCPI to meet the BAC is: TCPI = (BAC-EV) / (BAC-AC)
Formula for TCPI to meet the EAC is: TCPI = (BAC EV) / (EAC AC)
A high TCPI means a tight budget: When youre looking at the TCPI for a project, a higher number means its time to
take a stricter cost management approach. When the number is lower than one, you know youre well within your
budget and you can relax a bit. Remember lower = loser? Well, with TCPI, its the opposite. A higher number
means that your budget is too tight. You want it lower to give you more room to spend money!