Define Each Term In Your Own Words Calculate These Values ✓ Solved

Define Each Term In Your Own Words Calculate These Values For The Abo

Define each term in your own words, calculate these values for the above project, and show your work: Budgeted cost baseline (make a graph illustrating this one) Budget at completion (BAC) Planned value (PV) as of May 1 Earned value (EV) as of May 1 if the foundation work is only two-thirds complete. Everything else is on schedule. SV as of May 1. Actual cost as of May 1 is $160,000. Calculate the cost variance (CV) as of May 1. Schedule performance index (SPI) Cost performance index (CPI) Estimate to complete (ETC), assuming that the previous cost variances will not affect future costs Estimate at completion (EAC)

Sample Paper For Above instruction

Introduction

Project management relies heavily on various performance measurement tools and metrics to monitor, control, and predict the project's progress and outcomes. Key terms such as Budgeted Cost Baseline, Budget at Completion (BAC), Planned Value (PV), and Earned Value (EV) serve as essential components in Earned Value Management (EVM). Understanding, defining, and calculating these metrics allow project managers to assess project performance accurately and make informed decisions to steer the project toward successful completion.

Definitions of Key Terms

Budgeted Cost Baseline

The Budgeted Cost Baseline is a time-phased budget that reflects the planned expenditure of resources over the project's duration. It is used as a standard to compare actual and earned values, highlighting variances in project performance. Typically illustrated as a graph, it shows how the project’s budget spread across time, providing a basis for measuring progress versus planned spending.

Budget at Completion (BAC)

The Budget at Completion represents the total planned budget for the entire project. It is the sum of all planned costs, serving as the benchmark against which project performance is measured. BAC reflects the initial estimate of the total project cost and remains constant unless adjustments are formally made.

Planned Value (PV)

Planned Value as of a specific date, such as May 1, indicates the portion of the budget that should have been spent based on the project schedule. It represents the work scheduled to have been completed by that date, serving as a baseline for performance comparison.

Earned Value (EV)

Earned Value as of May 1 signifies the budgeted cost of the work that has actually been completed by that date. If the foundation work is only two-thirds complete, EV reflects two-thirds of the planned value for that work, helping assess whether the project is ahead, behind, or on schedule.

Schedule Variance (SV)

The Schedule Variance is calculated as the difference between EV and PV: SV = EV - PV. It indicates whether the project is progressing ahead or behind schedule. A positive SV suggests ahead of schedule, while a negative SV indicates behind schedule.

Cost Variance (CV)

The Cost Variance is the difference between EV and Actual Cost (AC): CV = EV - AC. It measures cost performance; a positive CV shows under budget, while a negative CV indicates over budget.

Schedule Performance Index (SPI)

The SPI is a ratio of EV to PV, calculated as SPI = EV / PV. It indicates schedule efficiency. An SPI of 1.0 suggests on-schedule progress; above 1.0 indicates ahead, and below 1.0 indicates behind schedule.

Cost Performance Index (CPI)

The CPI is a ratio of EV to AC, calculated as CPI = EV / AC. It measures cost efficiency; values above 1.0 denote under budget, and values below 1.0 indicate over budget.

Estimate to Complete (ETC)

ETC predicts how much more money will be required to complete the remaining work, assuming current variances will not affect future costs. It is often calculated as ETC = (BAC - EV) / CPI.

Estimate at Completion (EAC)

EAC forecasts the total project cost based on current performance. A common formula, assuming current cost trends continue, is EAC = AC + ETC.

Calculations

Assumptions and Data

  • Actual cost (AC) as of May 1: $160,000
  • Foundation work completion: two-thirds (2/3) complete
  • All other work scheduled as per plan and on schedule
  • Total project budget (BAC): to be calculated or assumed based on context
  • Work's planned value (PV) as of May 1: to be determined
  • Work's earned value (EV) as of May 1: two-thirds of the planned value for foundation work

1. Budget at Completion (BAC)

Suppose the total project budget is estimated at $240,000. This figure is typical for projects with detailed budgets, and allows for meaningful calculations for EV and variances.

2. Planned Value (PV) as of May 1

Given the project is scheduled and everything is on schedule, PV corresponds to the planned expenditure for the work scheduled to be completed by May 1.

If the total project duration is, for example, 6 months, and May 1 is mid-project, then PV might be approximately half of BAC, i.e., $120,000.

3. Earned Value (EV) as of May 1

The foundation work is only two-thirds complete. Assuming the foundation's planned value is, for instance, $80,000, then EV = 2/3 of $80,000 = approximately $53,333.

4. Schedule Variance (SV)

SV = EV - PV = $53,333 - $120,000 = -$66,667. The negative variance indicates the project is behind schedule.

5. Cost Variance (CV)

CV = EV - AC = $53,333 - $160,000 = -$106,667. The negative variance suggests the project is over budget.

6. Schedule Performance Index (SPI)

SPI = EV / PV = $53,333 / $120,000 ≈ 0.44. An SPI less than 1 signifies poor schedule performance.

7. Cost Performance Index (CPI)

CPI = EV / AC = $53,333 / $160,000 ≈ 0.33. A CPI less than 1 indicates cost inefficiency.

8. Estimate to Complete (ETC)

Assuming the CPI remains constant, ETC = (BAC - EV) / CPI = ($240,000 - $53,333) / 0.33 ≈ $587,878.78. This large ETC suggests significant additional costs are needed to finish the project under current performance trends.

9. Estimate at Completion (EAC)

EAC = AC + ETC = $160,000 + $587,878.78 ≈ $747,878.78. The projected final cost indicates the project may significantly overrun the original budget if current trends persist.

Conclusion

Effective project management hinges on continually monitoring these metrics. The calculations indicate that the project is behind schedule and over budget, necessitating corrective actions. Understanding these figures facilitates proactive management, potentially involving resource adjustments, scope revision, or schedule re-baselining.

References

  • Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. John Wiley & Sons.
  • PMI. (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Project Management Institute.
  • Belassi, W., & Tukel, O. I. (1996). A new framework for determining critical success/failure factors in projects. International Journal of Project Management, 14(3), 141-151.
  • Fleming, Q. W., & Koppelman, J. M. (2010). Earned Value Project Management. Project Management Institute.
  • Levine, H. A. (2014). Project Management: Budgeting and Scheduling. CRC Press.
  • Meredith, J. R., & Mantel, S. J. (2014). Project Management: A Managerial Approach. John Wiley & Sons.
  • Schwalbe, K. (2018). Information Technology Project Management. Cengage Learning.
  • Harrison, F. L., & Lock, D. (2017). Advanced Project Management: A Structured Approach. Gower Publishing, Ltd.
  • Jenkins, D. (2018). Practical Project Management. Routledge.
  • Cooke-Davies, T. (2002). The “real” success factors in projects. International Journal of Project Management, 20(3), 185-190.

Related Assignments