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CAPM07 | Project Cost Management Part 2 Earned Value – Preparing for the CAPM

CAPM07 | Project Cost Management Part 2 Earned Value – Preparing for the CAPM

Terri Echegoyen and Mark Phillipy continue to study for the CAPM exam. In this session we cover the last section of Chapter 7 Project Cost Management of the PMBOK. The real highlight of the session is focused on learning about Earned Value. This is the seventh session in the mentoring series “Preparing for the CAPM”. Mark and Terri study together out of the fifth edition of the PMBOK as Terri gets ready to take the CAPM exam.

Preparing for the CAPM Series

Announcement

I received such great feedback about “Preparing for the CAPM” series, I have decided to increase its value to those who are preparing to take the CAPM exam. In doing so, I have packaged the series into a full blown CAPM Prep program. The new and better series is the center of the site. Select here to learn more about the SensiblePM CAPM Prep Program.

What is covered in this Session?

During the podcast you will learn about the following Cost Management Process:

  • Control Costs

However, within this process the main focus is on the Earned Value tools and techniques which include:

  • Earned Value Management
    • Planned Value (PV)
    • Earned Value (EV)
    • Actual Cost (AC)
    • Schedule Variance (SV)
    • Cost Variance (CV)
    • Schedule Performance Index (SPI)
    • Cost Performance Index (CPI)
  • Forecasting
    • Estimate At Completion (EAC)
    • Budget At Completion (BAC)
  • To-Complete Performance Index (TCPI)
  • Performance Reviews
    • Variance analysis
    • Trend analysis
    • Earned value performance

Earned Value Summary

To summarize the Earned Value Calculations refer to the table below. Note that this table was adapted from the Earned Value Calculations Summary Table located on page 224 of the 5th edition of the PMBOK.

Earned Value Calculations

Earned Value Dimensions
Abbreviation Name Equation Meaning of Results
PV Planned Value
EV Earned Value
AC Actual Cost
BAC Budget At Completion
Variance Indicators
Abbreviation Name Equation Meaning of Results
CV Cost Variance CV = EV – AC Positive = Under planned cost

Neutral = On planned cost

Negative = Over planned cost

SV Scheduled Variance SV = EV – PV Positive = Ahead of Schedule

Neutral = On Schedule

Negative = Behind Schedule

VAC Variance At Completion VAC = BAC – EAC Positive = Under planned cost

Neutral = On planned cost

Negative = Over planned cost

Index Indicators
Abbreviation Name Equation Meaning of Results
CPI Cost Performance Index CPI = EV / AC Greater than 1.0 = Under planned cost

Exactly 1.0 = On planned cost

Less than 1.0 = Over planned cost

SPI Schedule Performance Index SPI = EV / PV Greater than 1.0 = Ahead of Schedule

Exactly 1.0 = On Schedule

Less than 1.0 = Over planned cost

Forecasting Indicators
Abbreviation Name Equation Meaning of Results
EAC Estimate At Completion EAC = BAC / CPI

EAC = AC + BAC – EV

EAC = AC + Bottom-up ETC

EAC = AC + [(BAC – EV)] / (CPI x SPI)]

ETC Estimate To Complete ETC = EAC – AC
TCPI To-Complete Performance Index TCPI = (BAC – EV) / (BAC – AC)

TCPI = (BAC – EV) / (EAC – AC)

Greater than 1.0 = Harder to complete

Exactly 1.0 = Same to complete

Less than 1.0 = Easier to complete

Share with your friends

If you are enjoying this series and it is helping you prepare for either the CAPM or PMP exam I would ask that you please share this with a coworker or friend. I am very interested in sharing this series with as many project managers as possible.

Thank you for sharing!

Comments

I would appreciate it if you would leave a comment below regarding your experience in preparing for either the CAPM or PMP exam. If you have tips for others on how to prepare for the test, I am sure others would appreciate the suggestions.

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