Budget at Completion (BAC) in Earned Value Management
The Budget at Completion (BAC) is a crucial part of the Project Management Body of Knowledge (PMBOK) Guide, Seventh Edition.
Importance: BAC represents the total budget allocated to the project. Understanding the BAC is necessary for project managers to better manage cost variance and ensure their projects are delivered within budget, and on time.
What it is: BAC is the original total budget for a project. The BAC value includes all approved budgetary funds (both direct & indirect costs) for all project activities.
How it works: In Earned Value Management (EVM), the BAC is used to compare with the actual cost and earned value to measure cost performance and cost variance of the project.
Answering examination questions: You might come across questions that test your understanding of BAC. They might involve calculations using the formula, or present a scenario where you are required to apply your knowledge of BAC.
Exam Tips: Always remember that BAC denotes the total planned budget for the project. Getting familiar with the formulas involving BAC can be advantageous. For instance, in calculating the Cost Performance Index (CPI) - CPI = Earned Value (EV) / Actual Cost (AC), and Cost Variance (CV) - CV = EV - AC. ix should be thoroughly practiced for exam purposes. Never forget that a negative cost variance means you're over budget, while a positive cost variance means you're under budget.
Always refer to the PMBOK Guide Seventh Edition for a detailed understanding of BAC.
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Budget at Completion practice test
Budget at Completion (BAC) represents the total approved budget for a project, encompassing all authorized work components, including labor, materials, and other associated costs. It is a baseline value used to monitor and control the project's financial performance throughout its life cycle. Comparing the BAC with Earned Value (EV) and Actual Cost (AC) enables project managers to determine if the project is on track financially, assess risks, and take corrective actions if required. It is crucial to maintain an accurate BAC to facilitate effective cost management and project performance evaluation.
Time: 5 minutes Questions: 5
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Project Management Professional Preparation Package (2024)
- Earn 35 PDUs needed for your PMP certification
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- bonus: If you upgrade now you get upgraded access to all courses