10 earned value management formulas PMP

Earned Value Management Formulas with Examples from PMI

Measuring earned value management is an excellent way to track the progress of a project. It combines data from scope, schedule and resource measurements to assess project performance and progress.

All of these formulas use EV either subtracting from it or dividing into it. Understanding “value” means actual project work it is easier to grasp the purposes of the calculation and how you could use them.

To get a complete earned value management abstract from the PMI which goes into great listing use cases and other applications of earned value management in traditional project management.

Earned Value Management Formulas

Earned Value Management Formulas Explained

Earned Value (EV)

Purpose: This the actual work (value) that has been completed in the project by the team. It is calculated by multiplying the projects budget by the % of work completed.

Formula: EV = BAC x % of Work Completed

*BAC = Budget at Completion  ie.Planned amount the project should cost

Planned Value (PV)

Purpose: This is the planned work (value) in the project plan that was expected to be completed at a given time before the project started. Similar to EV it is calculated using % of work planned multiplied by the projects budget.

Formula: PV = BAC x % of Work Planned to Be Completed

*BAC = Budget at Completion ie.Planned amount the project should cost

Schedule Variance (SV)

Purpose: This is the difference between earned value and planned value. It gives you a measurement of how much a project is ahead/behind schedule.

Formula:

SV Formula

Cost Variance (CV)

Purpose: This is the difference between earned value and actual cost. It gives you a measurement of how much a project is under or over budget.

Formula:

CV Formula

Putting formulas into context from looking at a chart:

  • If EV line is below PV, the project is behind schedule; if EV is above PV, the project is ahead of schedule.
  • If AC line is below PV, the project is within budget; if AC is above PV, the project is over budget.

Below is an example of the EVM charts you would be likely to encounter in your PMP Exam — solid lines represent actual figures while dotted lines represent forecasted figures:

EV and PV Chart

Judging from the chart above, we can infer that the project is within budget but behind schedule.

Schedule Performance Index (SPI)

Purpose: This the schedule status expressed as a ratio of earned value to planned value.

Formula:

SPI Index

PMP Exam Tip: You will be given an SPI index figure and you will need to determine if the project is behind or ahead of schedule. The best way to determine this is to remember high is good, low is bad ie.if less than one project is behind schedule and if above 1 it is ahead of schedule. The project is on schedule if SPI equals to 1.

Cost Performance Index (CPI)

Formula: This the schedule status expressed as a ratio of earned value to actual cost.

CPI Formula

Exam Tip: You will be given an CPI index figure and you will need to determine if the project is under or over budget. The best way to determine this is remember high is good, low is bad ie.if less than one project is over budget and if above 1 it is under budget. The project is on budget if CPI equals to 1.

Estimates at Completion (EAC)

As a project progresses there may be variations of the final actual cost versus what was originally planned. EAC is a way to forecast the planned cost based on the available data

Use Case #1: If the CPI would remain the same till end of project we divide the projected BAC by the CPI

Formula:

EAC Formula

Use Case #2: There was a delay by a unforeseen issue which will not occur again

Formula:

EAC Formula

Use Case #3: When both cost and schedule will impact future cost

Formula:

EAC Formula

Use Case #4:  If the original estimate is based on wrong data/assumptions or circumstances have changed

Formula: EAC = AC + Bottom-Up Estimate

Variance at Completion (VAC)

Purpose: You use this formula when trying to determine the new estimate at completion and the original planned value.

Formula:

VAC Formula

To-Complete Performance Index (TCIP)

Purpose: To forecast whether or not you can stick to your budget.

Formula:

tcpi

Estimate to Completion (ETC)

Purpose: To determine how much work more money will it cost to complete the project you would simply subtract what you already spent from the expected total budget.

Formula:

ETC Formula

Earned Value Management Tutorial

For Advanced Earned Value Management Take 15 Question Quiz by iZenbridge which all has excellent tutorials worth checking out.

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Earned Value Management Example Questions from PMI

Question 1: You are managing an industrial architecture project. You’ve spent $26,410 so far to survey the site, draw up preliminary plans, and run engineering simulations. You are preparing to meet with your sponsor when you dis cover that there is a new local zoning law will cause you to have to spend an additional estimated $15,000 to revise your plans . You contact the sponsor and initiate a change request to update the cost baseline. What variable would you use to represent the $26,410 in an earned value calculation?

  1. PV
  2. BAC
  3. AC
  4. *EV

Question 2: You’re working on a project that has an EV of $7,362 and a PV (BCWS) of $8,232. What’s your SV?

  1. –$870
  2. $870
  3. 0.89
  4. Not enough information to tell

Question 3: You are working on a project with an SPI of .72 and a CPI of 1.1. Which of the following BEST describes your project?

  1. Your project is ahead of schedule and under budget.
  2. Your project is behind schedule and over budget.
  3. Your project is behind schedule and under budget.
  4. Your project is ahead of schedule and over budget.

Question 4: A project has a BAC of $4,522 and is 13% complete. What is the earned value (EV)?

  1.  $3,934.14
  2. There is not enough information to answer.
  3. $587.86
  4. $4,522

Question 5: You are managing a project laying underwater fibre optic cable. The total cost of the project is $52/meter to lay 4km of cable across a lake. It’s scheduled to take 8 weeks to complete, with an equal amount of cable laid in each week. It’s currently the end of week 5, and your team has laid 1,800 meters of cable so far. What is the SPI of your project?

  1. 1.16
  2. 1.08
  3. .92
  4. .72

Question 6: You are managing a project with a BAC of $93,000, EV (BCWP) of $51,840, PV (BCWS) of $64,800, and AC (ACWP) of $43,200. What is the CPI?
1. 1.5
2. 0.8
3. *1.2
4. $9,000

Answers to PMI Example Earned Value Management Questions

Answer 1 – 4 since money spent so far represents earned value.

Answer 2: The answer is 1 SV = EV – PV ie. 7,362 – 8,232 = -870

Answer 3: The answer is 3 always remember when thinking about CPI and SPI remember Lower = Loser

Answer 4: [shc_shortcode class=”shc_mybox”]Answer is 3 ie. EV is work done so calculate 13% of work completed in money terms. 1% = 55.22 * 13 = 587.86[/shc_shortcode]

Answer 5: Answer is 4 ie.SPI = EV/PV. First calculate BAC (Budget at Completion) 52 * 4000 = 208,000. Next Calculate PV after 5 weeks which is 2500 (1 week expected 500m laid) * BAC = 520,000,000. EV = 1800 * BAC =  374400000. PV/EV = .72

Answer 6: Answer is 3 ie. CPI = EV/AC ie.51840/43200 = 1.2

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