PMP Exam Preparation

Project Cost Management

 Project Cost Management
7.1
Estimate
Costs

7.2
Determine
Budget

7.3 Control
Costs
 Project Cost Management
7.1
Estimate
Costs

7.2
Determine
Budget

7.3 Control
Costs
7.2 Determine Budget
 Project Cost Management
7.1
Estimate
Costs

7.2
Determine
Budget

7.3 Control
Costs
 Earned Value Management (EVM)

• EVM integrates project scope, cost and schedule measures

• Helps in assess and measure project performance and progress
• EVM uses three key measures for each work package
– Planned Value (PV): is authorized budget
– Earned Value (EV): Budgeted value of work performed/completed (<PV)
– Actual Cost (AC): Actual cost incurred
• Variances
– Schedule variance, SV = EV – PV
– Cost variance, CV = EV – AC
Performance Index
– Schedule Performance Index, SPI = EV/PV
– Cost Performance Index, CPI = EV/AC
 Earned Value Management (EVM) Formulae
• Note that EV comes first in all formulae
• Variances
• If it is a variance, the formula is EV minus some thing SV = EV – PV
• If it is an index, the formula is EV divided by some thing CV = EV – AC
• Performance
• If the formula is related to cost use AC Index
• If the formula is related to schedule use PV SPI = EV/PV
CPI = EV/AC
• Interpretations
• Negative variances are bad
• Indices less than one is bad
 EVM & Forecasting

• At beginning of project
– Estimate at completion (EAC) = Budget at Completion (BAC)
• EAC = AC + Bottom-up ETC
• EAC forecast for ETC work performed at the budgeted rate
– EAC = AC + (BAC – EV)
• EAC forecast for ETC work performed at the present CPI
– EAC = BAC/CPI
• EAC forecast for ETC work considering both SPI and CPI factors
– EAC = AC + [(BAC – AC) /(CPI * SPI)]
• To-Complete Performance Index (TCPI)
– Is projection of CPI that must be achieved on remaining work to meet the
specified goal such as BAC
– TCPI = budget remaining/funds remaining
= (BAC – EV)/(BAC – AC)
 EVM Exercise

– You have a project to build a new fence. The fence is four sided, 10
meter long each side. Each side to take 1 week, and budgeted for Rs
1000 per side.

– At the end of Day-3, 25 meters of fencing is done and spent Rs 2800.

Calculate below EVM measures

PV CPI
EV SPI
AC EAC
BAC ETC
CV VAC
THANK YOU