Name: Immanuel Uugwanga Fiindje

Student number: 200733354

FACULTY Economics and Management
DEPARTMENT Namibia Business School
SUBJECT PM Module 3: Cost and Procurement

SUBJECT CODE DPM

MARKS 40

Alternative Exam Assignment

Examiner:
Dr Elisha Woyo (Namibia Business School, University of Namibia)

1
Based on this case study, determine whether the group is behind or ahead of
their work
Based on the information from the case study we can tell that the group as a whole is
behind their work.

We concluded this by first calculating their individual earned value.

Bob ($2,000 * 60%)

Sue ($2,000 * 75%)

Roger ($2,000 * 10%)

Mike ($2,000 * 50%)

Jill ($2,000 * 80%)

The total of this EV is $5500 while the actual value is $9000

The group as a whole has fallen behind on their work.

Information provided shows that they have submitted $9000 as the cost but
produced only $5500 of value. What does this mean?

This means that the project is $3500 over budget. which means the cost of the project
assigned is reaching more than it should have in other words it is costing more than
the amount that was initially budgeted

They have submitted $9,000 as the cost but produced only $5,500 of (Earned) value.

$ 9000 - $5500

= $3500

Is the project operating within budget? Motivate your answer [5 marks]

No. The project is not operating withing budget it is actually over budget.

We came to this conclusion by considering the cost variance.

The cost variance of this project indicates that it is over budget which means the cost
of the project assigned is reaching more than it should have in other words it is costing
more than the amount that was initially budgeted. The cost variance is calculated using
(EV-AC):

2
$5,500 – $9,000 = – $3,500

A negative value, in this case – $3,500 indicate that this project is actually over budget
and not operating within budget.

Is the project ahead or behind schedule? Motivate the answer [5 marks]

The project is behind schedule. We concluded this by looking at the schedule variance
(SV) The schedule variance of this project indicates that it is behind schedule meaning
it will not be completed by the appointed time of one week.

The schedule variance is calculated using (EV-PV):

$5500 – $10,000=– $4,500

Negative is behind schedule, Positive is ahead of schedule in this case the negative
value of – $4,500 indicates the project is behind schedule.

Based on the results presented in this case, what is the team’s average cost
performance efficiency?

The cost performance efficiency is calculated below

= EV/AC

= $5,500 / $9,000

= 61.11%

Where EV is the Earned value while AC is the Actual value

This shows that the team is working at an average of 61.11% performance efficiency.

Furthermore, If the CPI is less than one, it indicates that the project is over budget to-
date whereas a CPI greater than one, indicates the project is running under-budget. A
CPI of one indicates the project is exactly on budget

In this case the CPI is less than one which indicates that the project is over budget.

What does the SPI presented in this case study tell you?

This is the measure of how close the project is from being completed compared to the
schedule.

The SPI which is the Schedule Performance Index is calculated using

3
= (EV/PV)

= $5,500 / $10,000

= which will yield 55%

= 0.55

If the SPI is greater than one it indicates that the project is progressing well against
the schedule while if it is one it shows that it is progressing as planned in this case the
SPI is 0.55 which is a value less than one and indicates that the project is running
behind schedule.

The 0.55 SPI therefore shows that the project will most likely need another week for
completion since it is behind schedule.

Identify the BAC of the project.

 BAC is the original budget total.

 For this project, it is $10,000.

Will the project be completed using the same budget amount?

No, the project will not be completed using the same budget amount.

The BAC which is the original budget for this project is $10,000. The amount “currently
expected” for the total project cost is $16,363 which is calculated using BAC/CPI:

$10,000/.611

= $16,363

Hence after calculating the VAC which is the Variance at completion (A project
management concept of that describes projection)

We can deduce that the project will not be completed using the same budget amount
of $10 000.

4
The VAC is -$6,363 which means the project is $6363 over budget and it will
impossible to hit the initial budget of $ 10000

What does the CV and SV of the project in this case study indicates?

a) Cost variance (CV)

The cost variance of this project indicates that it is over budget which means the cost
of the project assigned is reaching more than it should have in other words it is costing
more than the amount that was initially budgeted. The cost variance is calculated using
(EV-AC):

$5,500 – $9,000 = – $3,500

A negative value, in this case – $3,500 indicate that this project is actually over budget.

Monitoring project cost variance is critical to ensuring the project is delivered on budget

b) Schedule variance (SV)

The schedule variance of this project indicates that it is behind schedule meaning it
will not be completed by the appointed time of one week. The schedule variance is
calculated using (EV-PV):

$5500 – $10,000=– $4,500

Negative is behind schedule, Positive is ahead of schedule in this case the negative
value of – $4,500 indicates the project is behind schedule.

Monitoring Schedule Variance is critical to delivering the project on-time