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TOPIC: ETC Formula: Atypical case?

ETC Formula: Atypical case? 3 years 10 months ago #3100

  • Edward Wada
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I normally see the ETC formula to be

ETC = BAC - AC

however on your formual sheet there is also ETC = BAC - EV (atypical). On one of your simulated exams the BAC- EV was required.

Question:
1) Can you clarify when we use BAC - EV vs BAC - AC?
2) Can you give an example question that would we would use BAC - AC? Or if possible, make a slight change in the same question, so we would know when we would use BAC - EV?

Thanks.

ETC Formula: Atypical case? 3 years 9 months ago #3108

  • Khurram Hussain
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Dear Edward:

The formula you have mentioned ETC = BAC – AC is not correct. Can you please share the reference where you saw this one?

Estimate at Completion is equal to actual costs to date plus our estimate to complete the remaining work. This means:

EAC = AC + ETC

This implies that:

ETC = EAC – AC

You can only use this formula when you already know your EAC and AC. Practically speaking you first calculate your ETC, and based on that you calculate your EAC. So in real life, you will not use this formula expect for some tricky PMP exam question.

Now the question is, if we don’t know the ETC, how do we calculate this? If you think that the future cost performance will conform to the original plan, use the following formula:

ETC = BAC – EV

However, if you think that the future cost performance will be as good or as bad as the current cost performance, use the following formula:

ETC = (BAC – EV)/CPI

Please let me know if this resolves your confusion.

Regards,

Khurram

ETC Formula: Atypical case? 3 years 9 months ago #3110

  • Edward Wada
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I got the formula from the material, I bought from Cornelius' company (OSP). :unsure: See exact reference to below. Also I believe on a OSP simulated test, ETC = BAC-AC was referenced.

PMP® Formula Pocket Guide
Copyright © 2009-2011 by OSP International LLC. All rights reserved. Version 2.2 - Use with PMBOK® Guide 4th Edition
Earned Value

ETC = EAC - AC
ETC ‘atypical’ = BAC - EV
ETC ‘typical’ = (BAC - EV) / CPI
ETC ‘flawed’ = new estimate

I hope the reference help? :cheer: Can you help explain when to use EAC-AC vs BAC - EV on the test now?

ETC Formula: Atypical case? 3 years 9 months ago #3111

  • Khurram Hussain
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Dear Edward:

Please see my comments inline:

"I got the formula from the material, I bought from Cornelius' company (OSP). See exact reference to below. Also I believe on a OSP simulated test, ETC = BAC-AC was referenced."

Are you sure the formula for ETC mentioned is BAC - AC. It should be EAC - AC not BAC - AC. Can you please confirm?

PMP® Formula Pocket Guide
Copyright © 2009-2011 by OSP International LLC. All rights reserved. Version 2.2 - Use with PMBOK® Guide 4th Edition
Earned Value

ETC = EAC - AC This is correct
ETC ‘atypical’ = BAC - EV This is correct
ETC ‘typical’ = (BAC - EV) / CPI This is correct
ETC ‘flawed’ = new estimate This is correct

I hope the reference help? Can you help explain when to use EAC-AC vs BAC - EV on the test now?

EAC - AC and BAC - EV are both correct formulas for calculating ETC

Let's prove these two formulas are correct.

ETC = EAC - AC
ETC = (AC + BAC - EV) - AC .... using the formula EAC = AC + BAC - EV [PMBOK4 page: 184]
ETC = AC + BAC - EV - AC
ETC = BAC - EV

So both of these formulas are okay if your are calculating the ETC work to be performed at the budgeted rate. Which of the two should you use? That depends on which two inputs are available to you in the scenario.


Please let me know if this helps.

Warm regards,

Khurram

ETC Formula: Atypical case? 3 years 9 months ago #3128

  • Edward Wada
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I guess I am still confused. So I will go back to my original intended questions.

Question:
1) Can you clarify when we use BAC - EV vs EAC - AC? ( Which of the two should you use? That depends on which two inputs are available to you in the scenario., I understand one uses EV vs AC, but why would one be "atypical"?)

2) Can you give an example question that would we would use EAC - AC? Or if possible, make a slight change in the same question, so we would know when we would use BAC - EV? Please give example questions / scenarios to help clarify.

Thank you.

ETC Formula: Atypical case? 3 years 9 months ago #3129

  • Cornelius Fichtner
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Edward,

May I suggest our PMP Exam Formula Study Guide at www.pmformulas.com?

I'm not trying "to make a sale" here, but if you are having trouble understanding the EV formulas, then the formula study guide is a great tool where you have all the formulas in one place.

1) Here is what the formula guide says about these formulas
ETC = EAC - AC: Inversion of the same formula from the EAC calculations. Note: This ETC formula is listed in only one (the “most famous”) PMP prep workbook. No others list it. We recommend using it, if no keywords are given.
ETC = BAC - EV : Assumption: use formula if current variances are thought to be atypical in the future.
ETC = (BAC - EV) / CPI :Assumption: use formula if current variances are thought to be typical in the future.

2) Here is a sample question from our formula study guide:
Question 10: PV = 100, EV = 105, BAC = 400, AC = 102, CV = 3, ETC = 300, EAC = 407. The ETC is given as 300. However, how much would the Estimate to Complete be if we assume that current variances are thought to be atypical?
and the answer is of course BAC-EV
Until Next Time,
Cornelius Fichtner, PMP, CSM
President, OSP International LLC
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