PMP Earned Value Review

Cost & Schedule

 Cost Variance = Earned Value – Actual Cost, or CV = EV – AC

 Cost Performance Index = CPI = EV/AC
 Schedule Variance = Earned Value – Planned Value, or SV = EV – PV
 Schedule Performance Index = SPI = EV/PV

Remember that the variance calculations require that you subtract, while the indexes require that you divide.
Here is the key takeaway and best way to remember variances and indexes. Know it!

Earned Value (EV) is your key indicator. To understand cost performance, compare EV to actual costs (AC). To
understand schedule performance, compare EV to planned value (PV).

For cost, compare EV to AC, because that will tell you how efficiently you are spending your money.
For schedule, compare EV to PV, because that will tell you how far along you are compared to what you
planned.

Some folks choose to memorize whether CPI & SPI greater or less than 1 is good or bad. We recommend that
you really learn the material, rather than relying on memorization. That said, it is crucial to know some basic
formulas before you interpret them. Here are some additional key formulas to know.

Estimate At Completion (EAC) & Estimate To Complete (ETC)

Note: I like to do this one in a table format because the EAC & ETC formulas are closely related, and it is easy
to complete the table by relating ETC to EAC and vice versa.

  EAC ETC

If there’s no variance at all BAC EAC - AC

If there is variance and it is expected BAC/CPI BAC/CPI - AC

to continue

If there was variance, but now it’s AC + BAC - EV BAC - EV

gone

If your original estimates are AC + new ETC new bottom-

fundamentally flawed up estimate

If you are over budget and past due [(BAC - EV) / (CPI * [(BAC - EV) /
SPI)] + AC (CPI * SPI)]
Additional Cost Formulas

 (EV/BAC)*100% = % complete
 Variance at Completion = VAC = BAC – EAC
 To-Complete Performance Index (TCPI) based on BAC = (BAC – EV)/(BAC – AC)
 TCPI based on EAC = (BAC – EV)/(EAC – AC)

PMP Earned Value Questions:

Given a project with the following characteristics, answer the following questions:
 You are the project manager of a project to build fancy birdhouses.
 You are to build two birdhouses a month for 12 months.
 Each birdhouse is planned to cost $100.
 Your project is scheduled to last for 12 months.
 It is the beginning of month 10.
 You have built 20 birdhouses and your CPI is .9091.

1. How is the project performing?

A. Over budget and ahead of schedule
B. Under budget and ahead of schedule
C. Over budget and behind schedule
D. Under budget and behind schedule.

2. What is the actual cost of the project right now?

A. $1800
B. $2000
C. $2200
D. $2400

3. Assuming that the COST variance experienced so far in the project will continue, how much more money
will it take to complete the project?
A. $400
B. $440
C. $2800
D. $2840

4. If the variance experienced so far were to stop, what is the project’s estimate at completion?
A. $2400
B. $2440
C. $2600
D. $2800

5. What is the project’s TCPI using the project’s budget at completion?

A. .5
B. 1
C. 1.5
D. 2

6. Senior management wants to the percentage of the project that is complete. What should you report?
A. 75%
B. 83%
C. 92%
D. 95%

7. Imagine if instead of 10 months and costing $2200, the project was in month three and costing $4000. What
formula might you use for BAC?
A. [(BAC – EV) / (CPI * SPI)] + AC
B. new bottom-up estimate
C. AC + new ETC
D. AC + BAC – EV