# PM – 5

WEEK FIVE PROBLEM SET 5

Problem Set Five

Earned-value analysis. A project budget calls for the following expenditures:

Task |
Date |
Budgeted Amount |

Build forms |
April 1 | $10,000 |

Pour foundation |
April 1 | $50,000 |

May 1 | $100,000 | |

Frame walls |
May 1 | $30,000 |

June 1 | $30,000 | |

Remaining tasks |
July 1 and beyond | $500,000 |

Define each term in your own words, calculate these values for the above project, and show your work:

**1) Budgeted cost baseline (make a graph illustrating this one)**

This is the initial budget that is planned for a period of time. Budgeted cost baseline graph is illustrated below using the data that is listed in the below table.

Task |
Date |
Cumulative costs |

Build forms |
April 1 | $10,000 |

Pour foundation |
April 1 | $60,000 |

May 1 | $160,000 | |

Frame walls |
May 1 | $190,000 |

June 1 | $30,000 | |

Remaining tasks |
July 1 and beyond | $500,000 |

**2) Budget at completion (BAC)**

Budget at completion of the project is the total cost of the project which is $720,000 and it is illustrated in the below table.

Task |
Date |
Budgeted Amount |

Build forms |
April 1 | $10,000 |

Pour foundation |
April 1 | $50,000 |

May 1 | $100,000 | |

Frame walls |
May 1 | $30,000 |

June 1 | $30,000 | |

Remaining tasks |
July 1 and beyond | $500,000 |

Total | $720,000 |

**3) Planned value (PV) as of May 1**

Planned value is “the amount of work that should have been done by a particular date” (“The amount of work”…, Watts, 2014). For this problem the planned value as of May 1 is the addition of budgeted amount for build forms, pour foundation and frame walls until May 1.

Therefore the PV as of May 1 is $190,000.

**4) Earned value (EV) as of May 1 if the foundation work is only two-thirds complete. Everything else is on schedule.**

The actual work accomplished for the budgeted cost is earned value. Earned value as of may 1 is calculated in the below table.

Task |
Date |
Budgeted Amount |
Earned Value |

Build forms |
April 1 | $10,000 | $10,000 |

Pour foundation |
April 1 | $50,000 | 2/3($50,000)=$33,333.33 |

May 1 | $100,000 | 2/3($100,000)=$66,666.67 | |

Frame walls |
May 1 | $30,000 | $30,000 |

Total Earned Value | $140,000 |

**5) SV as of May 1.**

Schedule variance is calculated as difference between EV and PV(Watts, 2014).

SV=EV-PV

Earned value as of May 1 is $140,000 and planned value as of May 1 is $190,000. Therefore, schedule variance as of May 1 is

$140,000-$190,000= ($50,000)

As the schedule variance value is negative this indicates that the project is behind the schedule.

**6) Actual cost as of May 1 is $160,000. Calculate the cost variance (CV) as of May 1.**

Cost of variance is the difference between earned value and actual cost and is represent in the mathematical format below(Watts, 2014).

Cost of variance (CV)= Earned Value(EV)-Actual Cost(AC)

$140,000-$160,000=($20,000)

This negative value of CV indicates that project is over budget.

**7) Schedule performance index (SPI)**

Schedule performance index gives an idea of how much project is completed by dividing the earned value to the planned value (Watts, 2014).

SPI=EV/PV

$140,000/$190,000=0.74

Based on the understanding of SPI and per the text book it is clear that if SPI value less than one that means project is behind the schedule.

**8) Cost performance index (CPI)**

Cost performance index is used to assess the project performance or efficiency of a project. It is the ration of earned value to the actual cost (Watts, 2014).

CPI=EV/AC

$140,000/$160,000=0.88

As the value of CPI is less than 1 this shows that project is over budget.

**9) Estimate to complete (ETC), assuming that the previous cost variances will not affect future costs**

Estimate to complete gives an idea of how much budget it will for the remaining activities in a project (Watts, 2014).

ETC=Budget at completion-Earned Value

For this project BAC=$720,000 and the Earned value=$140,000

ETC=$720,000-$140,000

Therefore, estimate to complete the project is $580,000.

**10) Estimate at completion (EAC)**

Estimate at completion is the total cost of completing all activities and expresses as sum of actual cost and estimate to complete (Watts, 2014).

EAC=Actual cost + Estimate to complete.

$160,000+$580,000=$740,000

Cumulative costs 1-Apr 1-Apr 1-May 1-May 1-Jun July 1 and beyond 10000 60000 160000 190000 220000 720000

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