TheFence Part 2
Thefence part 2
The new projectproposes to build a new fence with four sides. Each side of the fencewill take one day to build with a budget of $1,000 for every side.The sides have a finish-to-finish relationship i.e. they will befinished one after the other and today is the third day of theproject. As such, the project has the ensuing characteristics,
PV: This is theexpected worth of the work planned to be finished. Here, the projecthas accounted or budgeted $1,000 for each side of the fence, andsince the current values disclose the development as at end of day 3,the value is $3,000 i.e. 1000 + 1000 + 1000 = $ 3000 for side 1, 2,and 3. This means that one should have finished or done $3,000 worthof work.
EV: The earnedvalue is the likely value of the work accomplished. Here, the EV willbe the expected amount for the finished work i.e. for two completesides i.e. 1 and 2, the half-done side 3, and the almost complete(75% done) side 4. I.e. 1000 + 1000 + 500 + 750 = $ 3,250. This meansthat one has indeed completed $3,250 value of work
AC: The actualcost sustained for one to finish the work i.e. 1,000 + 900 + 1000 +300 = $3,200, meaning that the project has actually spent $3,200
BAC: This is thesum of money accounted for the full project. The project hasaccounted $1,000 for each side and since there are 4 sides, BAC =1000 + 1000 + 1000 + 1000 = $4,000 i.e. the project has a budget of$4,000
CV or CostVariance: This is the worth of EV minus that of AC i.e. 3,250 –3,200 = 50, meaning that the project is under budget by $50
CPI or costperformance index is the worth of EV divided by the worth of AC.Here, CPI = $3,250 / $ 3,200 = 1.016, meaning that one is getting$1.02 dollars for every one dollar spent or put into the project.
SV or theSchedule Variance is the value of EV minus the value of PV. Here, thevalue of SV = $3,250 – $3,000 = $ 250. This means that the project isahead of schedule by $250.
SPI or scheduleperformance index is the worth of EV divided by the value of PV(Mulcahy, 2013) i.e. progressing at X % of frequency originallyanticipated. Here, SPI = 3,250 / 3000 = 1.083. This means that theproject is continuing at 108% of the rate projected.
EAC or Estimateat Completion: Lipke, Zwikael, Henderson & Anbari (2009) assertthat this is the present expectation of the complete project cost,which is the value of BAC divided by the value of CPI. Here, EAC =$4,000 / $1,016 = $ 3,937. This means that the one currentlyestimates that the entire project will cost $3,937.
ETC: Mulcahy(2013) contend that the estimate to completion is the extra quantityanticipated for the project to complete i.e. EAC – AC. Here, ETC =$3,937 – $ 3,200 = $737, meaning that the project needs to spend $737more to complete the project.
VAC: Lipke et. al(2009) assert that Variance at Completion is the amount under or overthe budget, which one anticipates to be at completion of the budgeti.e. VAC = BAC – EAC = 4,000 – 3,937 = $63, meaning that thecurrent estimates demonstrate that the project will be $63 underbudget upon completion.
Here, theproject requires $737 for completion and is $63 under the budget. Inaddition, the project is ahead of schedule by $250 thus, a strongcumulative performance.
Lipke, W., Zwikael, O., Henderson, K., & Anbari, F. (2009).Prediction of project outcome: The application of statistical methodsto earned value management and earned schedule performance indexes.International journal of project management, 27(4),400-407.
Mulcahy, R. (2013). Project Management Professional ExaminationPrep, Eighth Edition. RMC Publications.