The Top 8 Formulas to Memorize Before

Your PMP Exam

By SimplilearnLast updated on Sep 13, 201930485

If you’re studying for the PMP® exam, you have probably already learned that you need
to know some frequently used project management formulas—along with where to use
them, how to use them, how to compute them, and most importantly, how to derive the
values. In fact, many say that the most difficult part of the exam is learning all the PMP
formulas.

Are you a professional who is aspiring to be a project manager? Try answering this PMP Practice Prep
Questions and assess yourself!
We’ve put together a list of cost management formulas that you’ll need to know, along
with a breakdown of how and when to use them.

Watch a video on PMP Certification Training

Cost Management Knowledge Area PMP Formulas

Although there are more than 25 project management formulas that you might need to
tackle during the exam, there are a few cost management formulas that are very
important, and which you’re likely to encounter more than once during the exam.
Further, many of the calculation-based questions are based on these top 8 cost
management formulas.
 1 Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC)

2 Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)

3 Cost Performance Index (CPI) = EV / AC

4 Schedule Performance Index (SPI) = EV / PV

5 EAC = AC + Bottom-up ETC

6 EAC = BAC / Cumulative CPI

7 EAC = AC + (BAC – EV)

8 EAC = AC + [BAC – EV / (Cumulative CPI ´ Cumulative SPI)]

Formulas 1 – 4

Take a look at the first four formulas above and try to find out the commonalities in
them. Not getting it yet? Yes, the easiest part is Earned Value (EV). It appears above in
all the formulas, which means you have to derive the values of cost variance, schedule
variance, cost performance index, and schedule performance index, keeping Earned
Value in mind at first.

Earned Value comes before any other value. Most importantly, if you are working cost-
related questions; think about the actual cost with Earned Value. If the question is about
a schedule, think about planned value along with the earned value. If it is a matter of
variance, you need to subtract actual cost and planned value from earned value—
depending on the situation.

Similarly, if it is a question of getting index values, actual cost and planned value will be
divided from earned value. If it is a matter of cost performance index; actual cost will be
divided from earned value and if it is scheduled performance index; the planned value
will be divided from Earned Value. So, in all these circumstances, Earned Value plays a
huge role, which is why it’s at the top of the list.

Formula 5

5 EAC = AC + Bottom-up ETC

Since you will derive the estimate at completion, you need to focus on the actual costs
incurred; only then can you obtain the future value you need for processing the project.
See the above formula; it is used when the original estimate is fundamentally flawed.
You use this formula to calculate an actual plus new estimate for the remaining work.

Formula 6

6 EAC = BAC / Cumulative CPI

If you were asked during the examination whether you are a good project manager,
working on the project as planned—i.e., are you able to maintain positive values in both
CPI and SPI—in this case, you would use the above-mentioned formula. This formula is
used when the original estimation is met without any deviation.
Formula 7

7 EAC = AC + (BAC – EV)

If you find yourself in bad shape during the project execution and have incurred more
money on the project than expected or planned, use this formula to calculate the
estimate at completion value. Again, your actual cost will be used first.

Formula 8

8 EAC = AC + [BAC – EV / (Cumulative CPI ´ Cumulative SPI)]

This formula is used to calculate actual to date plus the remaining budget changed
based on performance—used when we believe the current ratio is typical as planned. In
order to meet the schedule as decided earlier, we calculate the EAC accordingly to
meet that schedule.

Conclusion

In order to best decide which formula to use and where to make sure you’re reading the
question carefully and consider the hypothetical situation, a project manager would be
in when faced with this sort of problem.