PMP Formulas

Question 1

Earned Value (EV)

Answer 1

• As of today, what is the estimated value of the work actually accomplished?
• EV = earned value
• BAC = budget at completion
• EV = % complete x BAC

Question 2

Estimate at Completion (EAC)

Bottom-Up ETC Formula

Answer 2

• Forecasts the project budget while the project is in progress
• This formula uses bottom-up estimating to calculate a new ETC and then new EAC
  
  • AC = actual cost
  • ETC = bottom-up estimate to complete
  • EAC = AC + bottom-up ETC

Question 3

Estimate at Completion (EAC) CPI and SPI

Answer 3

• Forecasts the project budget while the project is in progress modified by performance
• Used when current variances probably typical of future
• Schedule constraints will influence the completion
• AC = actual cost
• BAC = budget at completion
• EV = earned value
• CPI = cost performance index OR SPI = schedule performance index
• EAC = AC + ((BAC – EV) / (CPI x SPI))

Question 4

Estimate at Completion (EAC)

Current Cost Performance

Answer 4

• Forecasts the project budget while the project is in progress
• Calculates actual costs to date plus remaining budget based on current cost
• Used when current variances are thought to be atypical of the future
• AC = actual cost
• BAC = budget at completion
• EV = earned value
• EAC = AC + (BAC – EV)

Question 5

Estimate at Completion (EAC)

Standard or No Variance Formula

Answer 5

• Typical way forecasting the project budget while the project is in progress
• BAC = budget at completion
• CPI = cost performance index
• EAC (Standard) = BAC / CPI

Question 6

Estimate to Complete (ETC)

Answer 6

• From this point on, how much more do we expect it to cost to finish the project?
• EAC = estimate at completion
• AC = actual cost
• ETC = EAC – AC

Question 7

Beta Standard Deviation

Answer 7

• Standard deviation for PERT estimate
• There is a 68% chance of estimate falling +/- 1 σ
• There is a 95% chance of estimate falling +/- 2 σ
• There is a 99% chance of estimate falling +/- 3 σ
• σ = (P – O)/6

Question 8

Cost Performance Index (CPI)

Answer 8

• Closer to 1, the better we are performing on cost
• We are getting $? worth of work out of every $1 spent
• funds are or are not being used efficiently
• Greater than one is good; less than one is bad
• EV = earned value
• AC = actual cost
• CPI = EV / AC

Question 9

Schedule Performance Index (SPI)

Answer 9

• Closer to 1 is better
• We are progressing at ? percent of the rate originally planned
• Greater than one is good; lesser than one is bad
• EV = earned value
• PV = planned value
• SPI = EV / PV

Question 10

Variance at Completion (VAC)

Answer 10

• As of today, how much over budget or under budget do we expect to be at the end of the project?
• BAC = budget at completion
• EAC = estimate at completion
• VAC = BAC – EAC

Question 11

Present Value

Answer 11

• FV= future value
• i = interest rate
• n = number of time periods
• PV = FV / (1 + i)ⁿ

Question 12

Buy-or-Build Formula

Answer 12

• (build out of pocket - buy out of pocket) / (build monthly fees - buy monthly fees) = number of months it will take for the build it yourself to make sense
• if you keep it longer than that number, it’s better to build it yourself