Do you need customer support or technical assistance? Click here to submit a support ticket...

TOPIC: ETC formulas explained

ETC formulas explained 3 weeks 12 hours ago #18159

  • Ally Fulton
  • Ally Fulton's Avatar Topic Author
  • Offline
  • Fresh Boarder
  • Fresh Boarder
  • Posts: 4
  • Thank you received: 0
Hi all, I haven't been able to find any online resources that give a good explanation of the ETC formulas. I'd like to understand the difference between:

ETC = EAC - AC, and

ETC = BAC - EV

Fundamentally, this is a question about EAC vs BAC, and AC vs EV.

As I understand it, BAC is the original estimate, and EAC is a more recent estimate considering current project data. AC is the actual cost you've spent so far, while EV is the actual value in the amount of work you've completed ("earned") with however much you've spent so far. Correct me if I'm wrong or if there's a better explanation.

**What I'm confused about is why EAC is paired with AC, and BAC paired with EV. Why can't you mix and match those values to get ETC?** If a problem gives you BAC, are you supposed to know to subtract using EV and not AC automatically?

Second question - why do the other subsequent formulas use BAC-EV as their base rather than EAC - AC?

i.e. ETC = (BAC - EV) / (CPI * SPI) and ETC = BAC / CPI - AC

ETC formulas explained 2 weeks 2 days ago #18220

  • Donald Terry
  • Donald Terry's Avatar
  • Offline
  • Administrator
  • Administrator
  • Posts: 40
  • Thank you received: 13
Hi Ally,

In my opinion, I don't think you need a deep understanding of EVM to answer the questions correctly on the real exam. If you memorize the formulas and understand which to use for a given situation, then you should be in good shape for the exam. The only formula provided in the PMBOK® Guide for ETC is ETC=EAC-AC. If you are asked to calculate ETC on the real exam, this is most likely the formula that you will use. However, it is possible that you will need to use one of the alternate formulas for ETC, so you might want to be familiar with those as well.

At the start of the project, your budget at completion (BAC) is your estimate at completion (EAC). Additionally, as long as the project is going exactly as planned and you believe it will continue to go as planned, BAC and EAC will be the same. No matter what formula you use to calculate ETC, the answer will be the same. When project performance diverges from the plan (or you anticipate that it will), then things get more complicated and you need to understand past performance and make assumptions about future project performance to determine ETC. The assumptions that you make, and the information that you have, will determine the appropriate formula to use to calculate EAC or ETC.

There are many ways to calculate ETC depending on the assumptions that you want to make and the information you have available. If the budget at completion (BAC) is no longer valid, then you can re-estimate or calculate a new EAC. If the exam question provides the EAC then nearly all of the work has already been done for you. All you need to do is subtract what has already been spent to determine ETC. Your new EAC has already taken everything else into account including past performance and assumptions regarding future performance.

Why can’t you mix and match AC and EV in the formulas? Well, in some cases, you can. It would just provide you with different information. You could take BAC – AC instead of EV, and you would likely get a different result. BAC – AC would just tell you how much money, based on the budget, you have left to spend. If you believe that you will finish the project at BAC (in other words BAC is the same as EAC), then subtracting AC from the BAC would provide you with an ETC. The formula BAC – EV, on the other hand, just tells you how much of the total planned value (BAC) remains unearned. BAC – AC would tell you how much of the project budget (BAC) remains unspent.

Why do the other subsequent formulas use BAC-EV as their base rather than EAC – AC? When you have a new EAC, you have already done all of the work to establish a new EAC and ETC. There is no need to do further calculations. When you calculated a new EAC, you have already taken into account past project performance, any assumptions about future performance, and then calculated the new EAC. The formulas (BAC - EV) / (CPI * SPI) and ETC = BAC / CPI – AC are making calculations based upon project performance, but you have already done that work when you developed the EAC. If the exam question provides you with EAC, then there is nothing else that you need to do. If you want to know the ETC, then you just have to subtract what has already been spent (AC).

I hope that helps as you prepare for the exam.
Donald Terry, MBA, PMP, PMI-ACP
Independent contractor at OSP International LLC
Last edit: by Donald Terry.
Moderators: Yolanda MabutasScott GillardMary Kathrine PaduaSteven Mudrinich, PMPCynthia Lim Louis, PMPTracy Shagnea, PMPPatrick Floris PhD PMPJoe PangJohn Paul BugarinJason YorekLuke HoSimone ChristieAmy MartinezDaniel DewartEmily Rivera

OSP INTERNATIONAL LLC
OSP INTERNATIONAL LLC
Training for Project Management Professional (PMP)®, PMI Agile Certified Practitioner (PMI-ACP)®, and Certified Associate in Project Management (CAPM)®

Login