1. Project Management Professionals Hot Topics & Challenges - Cost Management
Presenter: Sohel Akhter, PMP, CCNA,ISMS
PMP and Six Sigma instructor, Netcom Learning
Adjunct Professor , MBA program, CUNY

2. Project Management Professionals Hot Topics & Challenges - Cost Management
1. PV 2. EV 3. AC Variance Formulas: 4. SV = EV – PV 5. CV = EV - AC Index Formulas: 6. SPI =EV/PV 7. CPI = EV/AC Forecasting Formulas: 8. BAC 9. EAC = BAC/CPI 10. ETC = EAC - AC 11. VAC = BAC - EAC 12. TCPI = (BAC – EV) / (BAC – AC) or (BAC – EV)/ (EAC – AC)

3. Project Management Professionals Hot Topics & Challenges - Cost Management
Planned Value
Earned Value
Actual Cost
Budgeted
Cost of
Work
Scheduled
Performed
Actual
New Name
The rest of the presentation will use the new names, but the instructor should urge students to memorize both, since both old and new are currently used on the PMP exam.
Old Name

4. Project Cost Management – Formula
Acronym
Term
Formula
Interpretation PV or
BCWS
Planned Value
Budgeted Cost of Work Scheduled
BAC x (Time Passed /Total Scheduled Time)
BAC x Planned % Complete
What is the estimated value of the work planned to be done? EV
BCWP
Earned Value
Budgeted Cost of Work Performed
BAC x (Work Completed /Total Work Required)
BAC x Actual % Complete
What is the estimated value of the work actually accomplished? AC
ACWP
Actual Cost
Actual Cost of Work Performed
What is the actual cost incurred for the work accomplished? SV
Schedule Variance
SV = EV- PV
A comparison of amount of work performed during a given period of time to what was scheduled to be performed.
Negative = behind schedule
Neutral = on schedule
Positive = ahead of schedule CV
Cost Variance
CV = EV – AC
A comparison of the budgeted cost of work performed with actual cost.
Negative= over budget
Neutral = on budget
Positive= under budget
CPI
Cost Performance Index
CPI= EV/AC
It measures the value of the work completed against actual cost.
CPI<1=over budget
CPI >1= under budget
CPI= 1= on budget
𝐂𝐏𝐈 𝐜
Cumulative CPI
𝐂𝐏𝐈 𝐜 = 𝐄𝐕 𝐜 / 𝐀𝐂 𝐜
It represents the cumulative CPI of the project at the point the measurement is taken.
SPI
Schedule Performance Index
SPI= EV/PV
It measures the progress to date against the planned progress.
SPI<1 = behind schedule
SPI > 1= ahead of schedule
SPI = 1 = on schedule
𝐒𝐏𝐈 𝐜
Cumulative SPI
𝐒𝐏𝐈 𝐜 = 𝐄𝐕 𝐜 / 𝐏𝐕 𝐜
It represents the cumulative SPI of the project at the point the measurement is taken.
BAC
Budget at Completion
How much did we BUDGET for the TOTAL project effort?
EAC
Estimate at Completion
If CPI is expected to be the same
EAC= BAC/CPI
If current variances are thought to be atypical of the future
EAC = AC+ (BAC-EV)
If both CPI and SPI influence the remaining work
EAC = AC+[ (BAC-EV)/ (CPI x SPI)]
What do we currently expect the TOTAL project to cost?
ETC
Estimate to Complete
ETC= EAC - AC
From this point on, how much MORE do we expect it to cost to finish the project?
VAC
Variance at Completion
VAC= BAC - EAC
How much over or under budget do we expect to be at the end of the project?
TCPI
To Complete Performance Index
If targeting the current plan
TCPI= (BAC- EV)/ BAC – AC
If targeting the current EAC
TCPI= (BAC- EV)/ EAC – AC
Performance that must be achieved in order to meet financial or schedule goals.
TCPI >1 = harder to complete
TCPI<1 = easier to complete
Project Cost Management – Formula

5. Actual Amount Spent by week Three Planned Completion by week three
Project Management Professionals Hot Topics & Challenges - Cost Management
Project
Planned End Date
Planned Budget
Actual Amount Spent by week Three
Planned Completion by week three
Actual Completion
Corporate Training Project
End of 4th week
$10,500 for total project
$2625 for each module
$9000
3 out of 4 modules
2 out of 4 modules PV
Planned Value
BAC x ( Time Passed /Total Scheduled Time)
= $10,500 x (3/4)
= $10,500 x .75
= $7875 EV
Earned Value
BAC x (Work Completed /Total Work Required)
= $10,500 x (2/4)
= $10,500 x .5
= $5250

6. Project Management Professionals Hot Topics & Challenges - Cost Management
You have a project to build a new fence. The fence is four sided as shown. Each side is to take one day to build and is budgeted for #1000 per side. The sides are planned to be completed one after another. Today is the end of day three. Using the project status chart below calculate the formulas.
Activity
Status End of day 3
Side 1
Complete, Spent $1000
Side 2
Complete, Spent $1200
Side 3
50% done, Spent $600
Side 4
Net yet started PV EV AC
BAC CV
3000
2500
2800
4000
-300
CPI SV
SPI
EAC
ETC
VAC
TCPI
.893
-500
.833
4479
1679
-479
1.25

7. Project Management Professionals Hot Topics & Challenges- Cost Management
You have a project to build a new fence. The fence is four sided as shown. Each side is to take one day to build and is budgeted for $1000 per side. The sides are planned to be completed one after another. Today is the end of day three. In this case, assume that the sides have a finish-to-finish relationship instead of a finish-to-start relationship.
Using the project status chart below calculate the formulas.
What is
Answer PV EV AC
BAC CV
CPI SV
SPI
EAC
ETC
VAC
TCPI
3000
Activity
Status End of day 3
Side 1
Complete, Spent $1000
Side 2
Complete, Spent $900
Side 3
50% done, Spent $1000
Side 4
75% done, Spent $300
3250
3200
4000 50
1.016
250
1.083
3937
Key S= Actual Start, F = Actual Finish, PS = Planned Start, PF = Planned Finish
737 63
.937

8. Project Management Professionals Hot Topics & Challenges - Cost Management
Your project is running well. In the latest earned value report, you see the CPI=1.2, the SPI= 0.8, the PV= $600,000 and the SV = -$120,000. You can’t find the CV in the report, so you calculate it based on the info given. What is the CV?
Key S= Actual Start, F = Actual Finish, PS = Planned Start, PF = Planned Finish