EVM - Earned Value(EV), Planned Value (PV), Actual Cost (AC)
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List and describe the three values calculated for an activity in earned value management. Give examples of each. Please give an example of each to support your write up.
Include at least one reference and cite it on the last page in APA format.
List and describe the three values calculated for an activity in earned value management. Give examples of each. Please give an example of each to support your write up.
Include at least one reference and cite it on the last page in APA format.
The Earned Value Management consists of following three values:-
1) Earned Value;
2) Planned Value; and
3) Actual Cost.
The Earned, Planned Value and Actual Cost are an aspect of EVM used to appraise the schedule and cost performance right through the project. The monitoring of the projects progress entails assessing whether you are on, ahead of or behind the schedule envisaged and further that it is as per the budgeted estimates, or under or in excess of it.
Examples:
PV = (Planned % Complete) X (BAC)
Planned Value is also known as Budgeted Cost of Work Scheduled (BCWS).
Suppose there is a project to be completed in a period of 12 months for which budgeted cost is say $.100, 000 and as per schedule 50% of the work should have been complete by now.
Putting the above in arithmetical form data:
1) Duration of the project is = 12 months;
2) And the cost that is BAC = $100,000;
3) Time spent by now = 6 months
As per definition of PV is the value of work that should have been completed up till now as per the schedule In other words 50% of the work should have been completed by now.
Computation:
(A)
PV = 50% of value of total work = 50% of BAC;
= 50% of BAC = 50% of $1, 00,000.
= (50/100) X $100,000
= $50,000
Therefore, Planned Value (PV) is $50,000
Computing EV:-
This project is expected to be completed in 12 months with a total cost of say $.100, 000 and 6 months have passed since and you find that only 40% of the work has been completed so far.
(B)
Definition of Earned Value says that it is the value of project that has been earned.
In this case only 40% of work has been completed.
Earned Value is = 40% of value of total work
= 40 % of BAC
= 40% of $100,000
= 0.4X$100,000 or 40/100 X 100,000
= $40,000
Earned Value (EV) is $40,000.
(C)
Actual Cost is also known as Actual Cost of Work Performed (ACWP).
It is very easy to arrive at actual cost:
As per the definition of Actual Cost, it is the amount of money that has been spent so far.
In our example $60,000 has already been spent on the project.
Now that is the Actual Cost = $60,000.
Reference: A Guide to PMP, Project Management - A Managerial Approach by Meredith & Mantel Jr.
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Solution Summary
The solution gives an idea about the various stages a project goes through, how to arrive at the present position as regards completion of the work and expenditure incurred to date, requires to be further made, direction in which the project is proceeding and corrective measures required or is adhering to the schedule chalked out, if not then where it went stray.
These things can be ascertained with the help of various well recognized computing methodologies, employed by project managers for their own and stakeholders' knowledge.
The following contains meaning and use of "Abbreviations" their application with easy to understand computational examples.
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Solution:
The Fundamental theory of Earned Value Management (EVM) is that:-
1) The value of a piece of work is equal to =
2) The amount of funds budgeted to complete it.
The Earned, Planned Value and Actual Cost are an aspect of EVM, details of which are used to appraise the schedule and cost performance right through the project.
The monitoring of the projects progress entails assessing whether you are on, ahead of or behind the schedule envisaged and further that it is as per the budgeted estimates, or under or in excess of it.
But this comparison will not reflect whether you are within the budgeted level, under or excess of it and this can be determined with the help of EVM.
Now before proceeding ahead I will explain you the meaning of EVM terminologies with definitions
PMBOK: "Planned Value (PV) is the authorized budget assigned to work to be accomplished for an activity or WBS component. Total planned value for the project is also known as Budget At Completion (BAC)."
Definition of Planned Value: Definition of Planned Value says that planned value is the value of work that should have been completed so far (as per the schedule).
i) Planned Value (PV) = is the budget sanctioned for the schedule of work to be complete within a specific date. The total planned value of an undertaking is equal to its budget at completion. It is also referred as the Budgeted Cost of Work Scheduled = BCWS.
ii) In equation format the total PV of a task = Its budget at completion or the total amount budgeted for the task (BAC);
PMBOK defines Earned Value : As per the PMBOK Guide "Earned Value (EV) is the value of work performed expressed in terms of the approved budget assigned to that work for an activity or WBS ...
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