Budget at Completion(BAC): The BAC is a point representing the total budget of the project.

On a cumulative plot it will be the last point on the PV curve. The PV cannot be greater than the BAC.

Cost variance (CV): CV=EV-AC This is the difference between the work that is actually completed and the cost expended to accomplish the work. A positive variance is good, and a negative variance is bad.

Schedule Variance (SV): SV=EV-PV This is the difference between the work that was actually completed and the work that was expected to be completed at this time. A positive variance is good and a negative variance is bad. Schedule performance index: The schedule performance index (SPI) is the ratio of work performed to work scheduled and can be used to estimate the projected time to complete the project. A schedule performance index of 1 or 100 percent means the project is on schedule. If the schedule performance index is greater than 1 or 100 percent then the project is ahead of the schedule. If the schedule performance index is less than 1 or 100 percent then the project is behind of the schedule. An SPI less than 1.0 means earned value is less than planned value, indicating that the project is behind the schedule. Cost Performance Index: The cost performance Index (CPI) is the ratio of the work performed to actual costs and can be used to estimate the projected cost of completing the project. If the cost performance index is equal to 1 or 100 percent then the budget and actual costs are equal; the costs are exactly as planned. If the cost performance index is less than 1 or less than 100 percent the project is over budget. If the cost performance index is greater than 1 or more than 100 percent, the project is under budget.

If the ratio is greater than 1.0, then the earned value is greater than actual cost, which means you spent less to complete the work performed than youd plannedthe project is under budget.

Example: Consider the following example:

You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the cost of construction will be $15,000 per mile and will take 8 weeks to complete.

2 weeks into the project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report performance and determine how much time and cost remain. Below, we will walk through each calculation to show how we arrive at the correct answers.

Budget at Completion
In the approach outlined by this book, we will always begin by calculating BAC. Budgeted at completion simply means, "how much we originally expected this project to cost". It is typically very easy to calculate. In our example, we take 20 miles of sidewalk * $15,000 / mile.

That equates to a BAC of $300,000. BAC = $300,000

Planned Value

The planned value is how much work was planned for this point in time. The value is expressed in dollars. Planned Value = Planned % complete * BAC We do this by taking the BAC ($300,000) and multiplying it by our % complete. In this case, we are 2 weeks complete on an 8 week schedule, which equates to 25%. $300,000 * .25 = $75,000. 'Therefore, we had planned to spend $75,000 after two weeks.

Earned Value
Planned value is what was planned, but earned value is what actually happened. EV = Actual % Complete * BAC In this case, we have completed 4 miles of the 20 mile project, which equates to 20%. We multiply that percentage by the BAC to get EV. It is $300,000 * 20/0 = $60,000. This tells us that we have completed $60,000 worth of work, or more accurately, we have earned $60,000 of value for the project.

Actual Cost
Building on the above illustration, we will calculate our actual costs. Actual cost is the amount of cost you have incurred at this point, and we are told in the example that we have spent $55,000 to date. In this example, no calculation is needed. AC = Actual Cost

Cost Variance
Cost variance (CV) is how much actual costs differ from planned costs. We derive this by calculating the difference between EV and AC. In this example, it is EV of $60,000 - AC of $55,000. A positive variance (as in this case), reflects that the project is doing better on cost than expected.

For those who are curious, the reason we use EV in this formula instead of PV is that we are calculating how much the actual costs have varied. If we used PV, it would give us the variance from our plan, but the cost variance measures actual cost variance, and EV is based on actual performance, whereas PV is based on planned performance. A positive CV is a good thing. It indicates that we are doing better on costs than we had planned. Conversely, a negative CV indicates that costs are running higher than planned.

CV = EV-AC
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Schedule Variance
Schedule variance (SV) is how much our schedule differs from our plan. Where people often get confused here is that this concept is expressed in dollars. SV is derived by calculating the difference between EV and PV. In this example, the schedule variance is EV of $60,000 - PV of $75,000. A negative variance (as in this case) reflects that we are not performing as well as we had hoped in terms of schedule. A positive SV would indicate that the project is ahead of schedule. SV = EV-PV

Cost Performance lndex

'The cost performance index gives us an indicator as to how much we are getting for every dollar. It is derived by dividing Earned Value by the Actual Cost. In this example, Earned Value = $60,000, and our Actual Cost = $55,000. $60,000 + $55,000 = 1.09. This figure tells us that we are getting $1.09 worth of performance for every $1 .OO we expected. A CPI of 1 indicates that the project is exactly on track. A closer look at the formula reveals that values of 1 or greater are good, and values less than 1 are undesirable. A CPI value < 1.0 indicates that costs were higher than budgeted. CPI > 1.0 indicates that costs were less than budgeted. CPI = EV + AC CPI = 1.09

Schedule Performance lndex

A corollary to the cost performance index is the schedule performance index, or SPI. The schedule performance index tells us how fast the project is progressing compared to the project plan. It is derived by dividing earned value by the planned value. In this example, earned value = $60,000, and our planned value = $75,000. $60,000 + $75,000 = 0.8. 'This tells us that the project is progressing at 80% of the pace.

An SPI value < 1.0 indicates less work was completed than was planned. SPI > 1.0 indicates that more work was completed than was planned

Estimate At Completion
Estimate at completion is the amount we expect the project to cost, based on where we are relative to cost and schedule. If that sounds confusing, think of it this way. If you know you are half way through the project, and you are currently 20% over budget, then the estimate at completion factors that variance out to the end of the project. There are many ways to calculate EAC; for the exam, the most straightforward way to calculate it is to take the BAC and divide it by our cost performance index. In this example, we expected to spend (BAC) $300,000 and our CPI is 1.09. $300,000 / 1.09 = $275,229.36. This should make sense. We are doing better on costs than we had originally planned, and this value reflects that.

EAC = BAC / CPI

Estimate To Completion
Estimate to completion is simply how much more we expect to spend from this point forward based on what we've done so far. It can be easily backed into by taking our estimate at complete (what we expect to spend) and subtracting what we have spent so far (Actual Cost). Given the numbers above, it would be EAC of $275,229.36 AC of $55,000 = $220,229.36. ?his tells us that we expect to spend $220,229.36 more, given our performance thus far. ETC = EAC AC ETC = $220,229.36

Variance at Completion
Variance at completion is the difference between what we originally budgeted and what we expect to spend. A positive variance indicates that we are doing better than projected, and a negative variance indicates that we expect the project to run over on costs. VAC = BAC - EAC In this example, our BAC was $300,000; however, our EAC is now $275,229.36. $300,000 - $275,229.36 = $24,770.64. VAC = $24,770.64