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Earned Value Management

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Earned Value Management (EVM) is a performance measurement technique that integrates scope, time, and cost data to assess project progress and forecast performance. By comparing the planned value (PV) of work with the earned value (EV) achieved and actual costs (AC) incurred, Project Management Pro…

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PMP - Earned Value Management Example Questions

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Question 1

You are in charge of a construction project expected to last 18 months with a budget of $1,800,000. At the end of 9 months, only 40% of the project is completed with expenditure of $900,000. What is the To-complete Performance Index (TCPI) based on the current cost variance?

Correct Answer: 1.2

To find the To-complete Performance Index (TCPI) based on the current cost variance, we'll use the formula: TCPI = (BAC - EV) / (BAC - AC) where BAC is the Budget at Completion, EV is the Earned Value, and AC is the Actual Cost. Given: - BAC = $1,800,000 (Budget at Completion) - The project is 40% complete at 9 months, so EV (Earned Value) = 40% * BAC = 0.4 * $1,800,000 - AC = $900,000 (Actual Cost spent) Let's calculate EV first: EV = 0.4 * $1,800,000 = $720,000 Now, we'll calculate TCPI: TCPI = ($1,800,000 - $720,000) / ($1,800,000 - $900,000) So, TCPI = $1,080,000 / $900,000 = 1.2 The To-complete Performance Index (TCPI) based on the current cost variance is 1.2.

Question 2

You are managing a construction project with a total budget of $1,500,000 over 15 months period. After 5 months, you have spent $700,000 and completed only 40% of the project. What is the Cost Performance Index (CPI)?

Correct Answer: 0.86

To find the Cost Performance Index (CPI), you divide the Earned Value (EV) by the Actual Cost (AC). Earned Value is the percentage of the total project budget that should have been completed at this point, so for 40% of the project, it's 40% of $1,500,000. Then, divide that value by the Actual Cost of $700,000 to get the CPI. # Calculate CPI total_budget = 1500000 percent_complete = 0.4 actual_cost = 700000 # Earned Value (EV) = Percent Complete * Total Budget earned_value = percent_complete * total_budget # CPI = EV / AC cpi = earned_value / actual_cost

Question 3

For a construction project costing $800,000 and expected to span 10 months, at the end of month 5, only 30% project is complete with an expense of $350,000. At this point, what is the Variance at Completion (VAC)?

Correct Answer: -$366,181

To calculate the Variance at Completion (VAC), we first need to determine the Estimate at Completion (EAC). The EAC is the projected total cost of the project based on the current progress and spending. Once we have the EAC, we can calculate the VAC by subtracting the EAC from the original Budget at Completion (BAC). Given: Budget at Completion (BAC) = $800,000 Planned project duration = 10 months Actual project completion at the end of month 5 = 30% Actual cost at the end of month 5 = $350,000 Step 1: Calculate the Actual Cost (AC) and the Earned Value (EV). AC = $350,000 EV = 30% × $800,000 = $240,000 Step 2: Calculate the Cost Performance Index (CPI). CPI = EV ÷ AC CPI = $240,000 ÷ $350,000 ≈ 0.686 Step 3: Calculate the Estimate at Completion (EAC). EAC = BAC ÷ CPI EAC = $800,000 ÷ 0.686 ≈ $1,166,181 Step 4: Calculate the Variance at Completion (VAC). VAC = BAC - EAC VAC = $800,000 - $1,166,181 ≈ -$366,181 Therefore, the Variance at Completion (VAC) for this construction project is approximately -$366,181. The negative value indicates that the project is expected to be over budget by this amount if the current trend continues.

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