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Project Management: Earned Value Computation

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Following are data reporting progress on a project. Work on all tasks contained in the table is scheduled to be complete as of the day of the report.

Budget Begun? Complete? Actual cost Earned Value
Task A 3,100 Yes Yes 3,100
Task B 4,000 Yes Yes 4,500
Task C 2,500 Yes Yes 2,250
Task D 4,000 Yes No 3,500
Task E 3,500 Yes Yes 4,000
Task F 2,500 No No

1. Using the 50-50 Rule, what is earned value for this project?

2. Using the 0-100 Rule, what is earned value for this project?

3. Note the discrepancy of earned value figures when using the 50-50 Rule and 0-100 Rule. Why is there a discrepancy? Which Rule should we use? Explain your rationale.

4. Using the 50-50 Rule earned value computation, what is schedule variance for the project as reported?
5. What is the schedule performance index (SPI)?

6. Using the 50-50 Rule earned value computation, what is the cost variance for the project as reported?

7. What is the cost performance index (CPI)?

8. If the total budget for this project is 50,000, use CPI to compute estimate at complete (EAC).

9. Using the earned value information garnered from the above table, provide your boss a brief status report on project progress to date. Also, provide projections for future

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Solution Summary

This solution calculates the earned value, planned value, schedule variance, and the cost performance index.

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Earned Value Management - Earned Value(EV), Planned Value (PV), Actual Cost (AC)

These are the tools to arrive at the correct position of any project as to the completion, expenditure incurred or further funds needed to be invested, and above all analyze critically where, and how the things went wrong.

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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