Thanks for the reply and sorry for getting back so late..
If we ignore the provided correct answer in the question and go by the explanation you have given, the correct formula in this case should be EAC = AC + (BAC-EV), right?

Sorry, I am unable to locate the source of question now.

There would have been more clarity if all the options given in question posted . Going by what is stated here EAC has been completed by assuming that CPI would be same for remainder of project ( What project has experienced to date can be expected to be continued in future also) . in such a scenario EAC= BAC/ CPI = BAC*AC / EV That works out to be 300,000*225,000/175,000 = 385,714 which might have been rounded off.
PMBOK 6 / page 265 describes common methods to calculate EAC
EAC = AC + (BAC – EV). Here we consider that what ever happened has happened but future work will be accomplished at budgeted rate, here PM re-estimate that the project will cost additional money shows that future work will not be accomplished at Budgeted rate.

Would you state where you got this question from?

Hi,
I came across this EVM related question online. Can someone please explain how to arrive at the correct answer?

Q: You are the project manager for a construction company with a budget of $300,000 and two months into the project, you find that there have been several changes in the project and you re-estimate that the project will cost additional money. If the Earned value to date is $175,000 and the costs incurred are $225,000 calculate the estimate at completion (EAC)?

The correct answer is: $385,000.

Thanks,
Saloni