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

TOPIC: Earn Value

Earn Value 5 months 5 days ago #21896

  • Moktar Hossain
  • Moktar Hossain's Avatar Topic Author
  • Offline
  • Fresh Boarder
  • Fresh Boarder
  • Posts: 8
  • Thank you received: 2
I am confused in using the different formula of Estimate at completion (EAC). Can anyone explain the easy way or trigger word depending on which EAC formula will be needed.

Earn Value 5 months 5 days ago #21907

  • Kyle Kilbride, PMP
  • Kyle Kilbride, PMP's Avatar
  • Visitor
  • Visitor
Here is the process I go through in my head:

EAC
This is concerned with how much (total) your project is expected to cost at the end. It is a total cost and is typically compared to your Budget at Completion (BAC) to calculate Variance at Completion (VAC). There are various ways to calculate this given project conditions.

ETC
This looks at how much it will cost to complete your project from a given point in time. For example, if you have spent (AC) $500 and the EAC for your project is $1500, then your ETC would be $1000 since you have $1000 left to spend to complete your project from the perspective of Earned Value.

Hope that helps.

Earn Value 5 months 5 days ago #21911

  • Moktar Hossain
  • Moktar Hossain's Avatar Topic Author
  • Offline
  • Fresh Boarder
  • Fresh Boarder
  • Posts: 8
  • Thank you received: 2
Thanks for your expanation. I am seeking the easy way to calculate EAC. As it different formula for different situation, I want to know about that different situation which indicate the category of formula should use.

Earn Value 5 months 5 days ago #21913

  • Kyle Kilbride, PMP
  • Kyle Kilbride, PMP's Avatar
  • Visitor
  • Visitor
Here is my general recommendation, but you need to read each question / situation closely to know which formula is appropriate:

EAC = AC + Bottom-up ETC - use this when your original estimate is flawed and you need to reestimate or re-baseline.

EAC = BAC / CPI - use this when there is a cost trend on the project that is likely to continue. You're essentially modifying your BAC to account for your project's cost performance.

EAC = AC + BAC - EV - use this if your project went off-track for any particular reason, but you expect the rest of the project to be on track to meet the original BAC.

EAC = AC + (BAC-EV)/(CPI*SPI) - use this if it is stated that there are cost and schedule performance concerns that should be accounted for in the calculation of EAC.

This is a generalized explanation, but hopefully it helps. You need to read the question closely. Look for indications that there is a cost trend that is expected to continue, or if it was simply an issue with one task that is not expected to continue. This will help differentiate between the second and third equations. If the question indicates that schedule is a factor, you'd have to use the last formula. If the question indicates the original estimate was flawed or is no longer valid you would use the first.

Earn Value 5 months 4 days ago #21926

  • Devin
  • Devin's Avatar
  • Offline
  • Expert Boarder
  • Expert Boarder
  • Posts: 91
  • Karma: 9
  • Thank you received: 49
PMBOK, pg. 267 is the key resource.

Kyle is right...

If I see something about "...at the budgeted rate", use EAC = AC + BAC – EV. If I see something about "...the costs index will remain constant", then use BAC/CPI. If I see CPI and SPI (given in the question) or something about "...cost and schedule must be maintained", use the CPI*SPI formula.

Also, I think candidates want to study the formulas and just expect the information to be easily plugged from the question. However, it's important to study the formulas, but even better to understand the relationships between EAC, ETC, VAC, CPI and SPI.

All these formulas are alebraic, ETC = EAC-AC and EAC = AC + ETC (new), these formulas are shown in both ETC and EAC, but are just algebraic re-arrangements. Prepcast does a good job of testing the correct use of the formulas, because as I recall a couple of the questions needed two or three steps to completed (re-arranging related formulas to find missing numbers to plug into a final solution).
Moderators: Yolanda MabutasMary Kathrine PaduaCynthia Lim Louis, PMPTracy Shagnea, PMPGabriella Dellino, PMPPatrick Floris PhD PMPJoe PangJohn Paul BugarinAmy MartinezEmily Rivera, PMPLisa Sweeney PMPHarry ElstonMani SelvanDenver MartinEric Wanyutu Kahiga, PMPSarah FucciThiago França, PMP®Felix Kamanga, PMPChan RampersaudElena MekhanoshinaKyle Kilbride, PMPKyle Kilbride, PMP

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