Terri Echegoyen and Mark Phillipy continue to study for the CAPM exam. In this session we cover the last section of Chapter 7 Project Cost Management of the PMBOK. The real highlight of the session is focused on learning about Earned Value. This is the seventh session in the mentoring series “Preparing for the CAPM”. Mark and Terri study together out of the fifth edition of the PMBOK as Terri gets ready to take the CAPM exam.

If you are new to project management or you are preparing to take the CAPM or PMP exam, grab your PMBOK and follow along. If you missed the first session, go back and start with the first in the series CAPM01 Introduction to Project Management.

Listen to the Podcast

During the podcast you will learn about the following Cost Management Process:

• 
  
• Control Costs
  

However, within this process the main focus is on the Earned Value tools and techniques which include:

• 
  
• Earned Value Management
  
  • 
    
  • Planned Value (PV)
    
  • Earned Value (EV)
    
  • Actual Cost (AC)
    
  • Schedule Variance (SV)
    
  • Cost Variance (CV)
    
  • Schedule Performance Index (SPI)
    
  • Cost Performance Index (CPI)
    
  
  
• Forecasting
  
  • 
    
  • Estimate At Completion (EAC)
    
  • Budget At Completion (BAC)
    
  
  
• To-Complete Performance Index (TCPI)
  
• Performance Reviews
  
  • 
    
  • Variance analysis
    
  • Trend analysis
    
  • Earned value performance
    
  
  

Earned Value Summary

To summarize the Earned Value Calculations refer to the table below. Note that this table was adapted from the Earned Value Calculations Summary Table located on page 224 of the 5th edition of the PMBOK.

Earned Value Calculations

Earned Value Dimensions

Abbreviation
Name
Equation
Meaning of Results

PV
Planned Value

EV
Earned Value

AC
Actual Cost

BAC
Budget At Completion

Variance Indicators

Abbreviation
Name
Equation
Meaning of Results

CV
Cost Variance
CV = EV – AC
Positive = Under planned cost

Neutral = On planned cost

Negative = Over planned cost

SV
Scheduled Variance
SV = EV – PV
Positive = Ahead of Schedule

Neutral = On Schedule

Negative = Behind Schedule

VAC
Variance At Completion
VAC = BAC – EAC
Positive = Under planned cost

Neutral = On planned cost

Negative = Over planned cost

Index Indicators

Abbreviation
Name
Equation
Meaning of Results

CPI
Cost Performance Index
CPI = EV / AC
Greater than 1.0 = Under planned cost

Exactly 1.0 = On planned cost

Less than 1.0 = Over planned cost

SPI
Schedule Performance Index
SPI = EV / PV
Greater than 1.0 = Ahead of Schedule

Exactly 1.0 = On Schedule

Less than 1.0 = Over planned cost

Forecasting Indicators

Abbreviation
Name
Equation
Meaning of Results

EAC
Estimate At Completion
EAC = BAC / CPI

EAC = AC + BAC – EV

EAC = AC + Bottom-up ETC

EAC = AC + [(BAC – EV)] / (CPI x SPI)]

ETC
Estimate To Complete
ETC = EAC – AC

TCPI
To-Complete Performance Index
TCPI = (BAC – EV) / (BAC – AC)

TCPI = (BAC – EV) / (EAC – AC)

Greater than 1.0 = Harder to complete

Exactly 1.0 = Same to complete

Less than 1.0 = Easier to complete

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If you are enjoying this series and it is helping you prepare for either the CAPM or PMP exam I would ask that you please share this with a coworker or friend. I am very interested in sharing this series with as many project managers as possible.

Thank you for sharing!

Comments

I would appreciate it if you would leave a comment below regarding your experience in preparing for either the CAPM or PMP exam. If you have tips for others on how to prepare for the test, I am sure others would appreciate the suggestions.

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