Problem on Earned Value Analysis : Test 1

You have been asked to calculate the Cost Performance Index for a project using earned
value Management techniques. It is currently day 20 of the project and the following
summarizes the current status of the project:

Activity Expecte Activity Expecte Expected Expected % Actual % Actual

d Cost Duratio d Completio Complete Complete Cost to
n Start n Date
Startup $100,000 10 days Date0 Date10 100 % 100 % $105,000
Constructio 325,000 14 days 8 22 12/14=85.714% 90 % 280,000
n
Finishing 50,000 12 days 18 30 2/12=16.667% 25 % 2,500

Calculate the Scheduled Variance, Schedule Performance Index, and Cost Performance Index
for the project.
Solution :

Step 1 : Calculated Budgeted Cost of the Work Scheduled (BCWS) to date:

Startup is 100 percent complete and we are beyond the expected completion date, so budgeted cost
is $1,00,000 for this activity.

Would expect Construction to be 85.714 percent complete and cost $2,78,571 to date.

Would expect Finishing to be 16.667 percent complete at a cost of $8,333 to date.

Budgeted Cost of Work Scheduled = $1,00,000 + $2,78,571 + $8,333 = $3,86,904

Step 2 : Calculate the budgeted Cost of the Work Performed(BCWP) to date:

Startup is 100 percent complete, so budgeted cost is $1,00,000.

Construction is actually only 90 percent complete, so budgeted cost for this much of the activity is
(3,25,000 * 0.9) = $2,92,500.

Finishing is now 25 percent complete, so budgeted cost is ($50,000*0.25) = $12,5000.

Budgeted Cost of Work Performed = $1,00,000 + $2,92,500 + $12,500 = $4,05,000

Step 3: Actual Cost (AC) of the project to date $10,05,000 + $ 2,80,000 + $ 2,500 = $3,87500

Step 4: Calculate performance measures:

Schedule Variance = $4,05,000 - $3,86,904 = $18,096

Schedule Performance Index = $4,05,000 / $3,86,904 = 1.0468

Cost Performance Index = $4,05,000 / $3,87,500 = 1.0451

The project looks good because it is both ahead of schedule and below the budgeted cost.