Estimate at Completion (EAC) is a projection of the total cost of a project at its completion, taking into account both the actual costs incurred so far and the remaining cost estimates. EAC can vary based on assumptions, risks, and the project's current performance. Several formulas can be used to…Estimate at Completion (EAC) is a projection of the total cost of a project at its completion, taking into account both the actual costs incurred so far and the remaining cost estimates. EAC can vary based on assumptions, risks, and the project's current performance. Several formulas can be used to calculate EAC, such as EAC = Actual Cost (AC) + Budget at Completion (BAC) - Earned Value (EV), or EAC = Actual Cost (AC) + (BAC - EV) / Cost Performance Index (CPI). EAC provides project managers with valuable insights into the final cost of a project, enabling them to make informed decisions about budget adjustments, resource allocation, and project risk management.
Estimate at Completion (EAC)
The Estimate at Completion (EAC) is a crucial concept in Project Management and specifically in the Earned Value Management (EVM) method. It is vital to understand this concept as per the PMBOK Guide Seventh Edition.
The EAC is a forecasted cost of the project when everything is completed. In other words, it refers to the total cost of all work once the project is completed. This includes the actual cost that has already been incurred and the remaining cost that is yet to be incurred.
The EAC plays a pivotal role in project estimation and management because it allows project managers to understand financially how their project is projected to end. It can act as an early warning system for projects that may overrun the budget, giving project managers time to rectify and manage the situation effectively.
Calculating the EAC: The typical formula for EAC is EAC = AC (Actual Cost) + ETC (Estimate to Complete). But it can vary sometimes based on various scenarios.
Exam Tips: Questions about EAC on the PMP exam will require you to understand the above EAC formula and concept. You may be asked to calculate the EAC using provided data or given project scenarios. Be prepared to interpret EAC values in terms of project performance and implications for project completion. Always remember: If the EAC is less than the budget at completion (BAC), that’s a good sign, indicating that the project will be completed under budget. If the EAC is greater than the BAC, then you are predicted to be over budget. And finally, if they are equal, then you are right on budget.
Keep these points in mind, understand the application, and you will be able to answer the questions on EAC accurately in the PMP exam.
You are the project manager for a building project. The BAC is $250,000, the AC stands at $100,000, with an EV of $80,000. What should the EAC be given the current project performance?
Question 2
You are the project manager for a road construction project with a budget at completion (BAC) of $300,000. The project's actual cost (AC) is $90,000, and the earned value (EV) is $75,000. What estimate at completion (EAC) should you anticipate?
Question 3
A project has a BAC of $150,000 and a CPI of 0.89. Should the project continue at its current performance, what would you estimate the EAC to be?
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