Earned Value Management

Correct Answer: EV / PV

The Schedule Performance Index (SPI) is a measure used in project management to determine the efficiency of time utilization on the project. It is computed by taking the ratio of the Earned Value (EV) and the Planned Value (PV). Hence, the formula is EV / PV. The SPI gives an idea about the time efficiency in the sense that it tells you how much you originally planned to spend compared to what you actually spent. If the SPI is greater than 1, it means the project is ahead of schedule, and if it's less than 1, it means the project is behind schedule. The other combinations given in the answers (EV / AC, AC / EV, AC / PV) are not right because they represent other types of performance indices or ratios, not the Schedule Performance Index.

Correct Answer: ETC is the estimated cost to complete the remaining work, while EAC is the estimated total cost of the project when completed

In Earned Value Management, Estimate To Complete (ETC) and Estimate At Completion (EAC) are two separate concepts. ETC is the estimated cost to complete the remaining work on the project. This is determined by examining the current progress of the project and estimating the cost of the work that is left to be done. On the other hand, EAC is the estimated total cost of the project when completed. This includes the actual cost of the work already done plus the estimated cost of the remaining work, i.e., ETC. This is why the other answers are incorrect, as they describe these concepts inaccurately. Some confuse EAC with the cost of the performed work, while others misstate ETC as the total projected cost or the actual cost of work performed, which is not accurate.

Correct Answer: Use the formula ETC = (BAC - EV) / CPI, where BAC is the budget at completion, EV is the earned value, and CPI is the cost performance index.

The best approach to calculate the Estimate to Complete (ETC) in this scenario is to use the formula ETC = (BAC - EV) / CPI, where BAC is the budget at completion, EV is the earned value, and CPI is the cost performance index. This method is the most accurate and widely accepted in project management, especially when dealing with projects that are not progressing as planned. It takes into account both the cost and schedule variances, providing a more realistic estimate based on current performance. To calculate: 1. BAC (Budget at Completion) = $2.5 million 2. EV (Earned Value) = 55% of $2.5 million = $1.375 million 3. AC (Actual Cost) = $1.8 million 4. CPI (Cost Performance Index) = EV / AC = 1.375 / 1.8 = 0.764 Then, ETC = (2.5 - 1.375) / 0.764 = $1.47 million This approach is superior because: 1. It uses actual performance data to predict future costs. 2. It accounts for both cost and schedule variances. 3. It's a standard method in Earned Value Management (EVM). The other options are less accurate or comprehensive: - Adding a flat 20% contingency doesn't consider actual performance. - Using the remaining work percentage with the original budget doesn't account for cost overruns. - Dividing the remaining budget by the percentage of work completed doesn't consider the project's efficiency. Using the EVM formula provides the most reliable estimate for completing the project, allowing for better decision-making and stakeholder communication.