PROJECT MANAGEMENT

SESSION – 20-21
PLANNED VALUE:
1. You have a project to be completed in 12 months. The budget of the project is 100,000 $. Six
months have passed and the schedule says that 50% of the work should be completed. What is
the project’s Planned Value (PV)?
ANS:
 Total Budget = $100,000
 Planned % Completion after 6 months = 50%
PV=100,000×0.50PV = 100,000 \times 0.50PV=100,000×0.50 PV=50,000PV = 50,000PV=50,000
So, the Planned Value (PV) is $50,000.
2. Consider a project in which the start and end dates for a task are March 1 and March 10,
respectively, and it’s March 4 completed today. If budget allotted to complete the task is 10
Lakhs, then calculate the PV for the task.
ANS:
Given Data:
 Start Date: March 1
 End Date: March 10
 Total Duration: 10 days
 Current Date: March 4
 Total Budget: ₹10,00,000
 Elapsed Duration: March 1 to March 4 → 4 days
 Planned % Completion = 410×100=40%\frac{4}{10} \times 100 = 40\%104×100=40%
PV=10,00,000×0.40PV = 10,00,000 \times 0.40PV=10,00,000×0.40 PV=₹4,00,000PV =
₹4,00,000PV=₹4,00,000
So, the Planned Value (PV) is ₹4,00,000.

EARNED VALUE:
3. You have a project to be completed in 12 months. The budget of the project is 100,000 $. Six
months have passed and 60,000 $ has been spent, but on closer review, you find that only 40% of
the work has been completed so far. What is the project Earned Value?
ANS:
Given Data:
 Total Budget = $100,000
 Actual % Completion = 40%
EV=100,000×0.40EV = 100,000 \times 0.40EV=100,000×0.40 EV=40,000EV = 40,000EV=40,000
So, the Earned Value (EV) is $40,000.

4. Consider a project in which the start and end dates for a task are March 1 and March 10,

respectively. At March 4 it is observed that only one fourth of the task is completed. If budget
allotted to complete the task is 10 Lakhs, then calculate the EV for the task.
ANS:
Given Data:
 Total Budget = ₹10,00,000
 Actual % Completion = 14=25%\frac{1}{4} = 25\%41=25%
EV=10,00,000×0.25EV = 10,00,000 \times 0.25EV=10,00,000×0.25 EV=₹2,50,000EV =
₹2,50,000EV=₹2,50,000
So, the Earned Value (EV) is ₹2,50,000.
ACTUAL COST
5. You have a project to be completed in 12 months. The budget of the project is 100,000 USD.
Six months have passed, and 60,000 USD has been spent, but on closer review, you find that only
40% of the work has been completed so far. What is the project’s Actual Cost (AC)? Also
identify PV and EV?
ANS:
Let's calculate the required values step by step.
Given Data:
 Total Budget (BAC) = $100,000
 Time Passed = 6 months (out of 12 months)
 Planned % Completion = 50% (since 6 months out of 12)
 Actual % Completion = 40%
 Amount Spent (Actual Cost, AC) = $60,000
1. Actual Cost (AC):
The Actual Cost (AC) is the amount actually spent on the project so far. Given that $60,000 has been
spent,
AC=60,000AC = 60,000AC=60,000
2. Planned Value (PV):
Planned Value (PV) is calculated using:
PV = \text{Total Budget} \times \text{Planned % Completion} PV=100,000×0.50=50,000PV =
100,000 \times 0.50 = 50,000PV=100,000×0.50=50,000
So, PV = $50,000.
3. Earned Value (EV):
Earned Value (EV) is calculated using:
EV = \text{Total Budget} \times \text{Actual % Completion} EV=100,000×0.40=40,000EV =
100,000 \times 0.40 = 40,000EV=100,000×0.40=40,000
So, EV = $40,000.
Final Answers:
 Actual Cost (AC) = $60,000
 Planned Value (PV) = $50,000
 Earned Value (EV) = $40,000
6. Consider a project in which the start and end dates for a task are March 1 and March 10,
respectively. At March 4 it is observed that, 6 Lakhs Rs. is spent to complete one fourth of the
task. If budget allotted to complete the task is 10 Lakhs, what is AC of activity at 4th of March.
ANS:
Given Data:
 Start Date: March 1
 End Date: March 10
 Total Budget (BAC): ₹10,00,000
 Actual % Completion by March 4: 14=25%\frac{1}{4} = 25\%41=25%
 Amount Spent (AC) by March 4: ₹6,00,000
Actual Cost (AC):
Actual Cost (AC) is the amount spent on the project up to a specific date.
Since ₹6,00,000 has been spent by March 4, the Actual Cost (AC) is ₹6,00,000.
COMBINED PROBLEM
7. A project team had planned to accomplish $25,000 worth of work to date. It has spent $23,000
to date and accomplished $20,000 worth of work. What is PV, EV and AC of the project as of
today?
Given Data:
 Planned Value (PV) = $25,000 (Budgeted cost of scheduled work)
 Earned Value (EV) = $20,000 (Budgeted cost of actual work completed)
 Actual Cost (AC) = $23,000 (Actual amount spent)
Final Answers:
 Planned Value (PV) = $25,000
 Earned Value (EV) = $20,000
 Actual Cost (AC) = $23,000
This means:
🔹 The project is behind schedule because EV < PV (i.e., only $20,000 worth of work is done instead
of the planned $25,000).
🔹 The project is over budget because EV < AC (i.e., $23,000 has been spent for work worth only
$20,000).
8. You have a project to be completed in 24 months. The budget of the project is 4,00,000 $. 12
months have passed, and you find that only 45% of the work has been completed so far and
2,40,000 has been spent. Find the PV, EV, AC, Cost Variance (CV), Schedule Variance (SV), Cost
Performance Index (CPI) and Schedule Performance Index (SPI).
ANS:
Given Data:
 Total Budget (BAC) = $400,000
 Total Duration = 24 months
 Elapsed Time = 12 months
 Planned % Completion = 1224×100=50%\frac{12}{24} \times 100 = 50\%2412×100=50%
 Actual % Completion = 45%
 Actual Cost (AC) = $240,000

1. Planned Value (PV):

Planned Value (PV) is the budgeted cost of scheduled work.

PV=400,000×0.50 PV=200,000PV = 200,000PV=200,000
Planned Value (PV) = $200,000
2. Earned Value (EV):
Earned Value (EV) is the budgeted cost of actual work completed.
EV=400,000×0.45 EV=180,000
EV = 180,000
Earned Value (EV) = $180,000
3. Actual Cost (AC):
Given: AC = $240,000
4. Cost Variance (CV):
Cost Variance (CV) tells us if we are over or under budget.
CV=EV−AC
CV = EV – AC
CV=EV−AC
CV=180,000−240,000
CV=−60,000
Cost Variance (CV) = -$60,000 (Over Budget)
🔹 A negative CV means the project is over budget.
5. Schedule Variance (SV):
Schedule Variance (SV) tells us if we are ahead or behind schedule.
SV=EV−PV
SV=180,000−200,000
SV=−20,000
6. Cost Performance Index (CPI):
CPI measures cost efficiency.
CPI=180,000/240,000
CPI=240,000/180,000
CPI=0.75
7. Schedule Performance Index (SPI):
SPI measures schedule efficiency.
SPI=PV/EV
SPI=180,000/200,000
SPI=0.90
9. A project has a total budget of $100,000 and is estimated to take 10 months to
complete. After 5 months, it is estimated to complete half of its work at the cost of 60%
of its budget, but it actually accomplished only $40,000 worth of the work, and spent
50% of its budget. What is the PV, EV, AC, CV, SV, CPI, SPI of the project after 5
months?
ANS:
Given Data:
 Total Budget (BAC) = $100,000
 Total Duration = 10 months
 Time Elapsed = 5 months
 Planned % Completion = 50%
 Planned Cost at this stage = 60% of total budget → $60,000
 Actual Work Accomplished (EV) = $40,000
 Actual Cost (AC) = 50% of budget → $50,000

1. Planned Value (PV)

PV=100,000×0.50
PV=50,000
Planned Value (PV) = $50,000 (Work expected to be completed by now)

2. Earned Value (EV)

EV=40,000EV = 40,000
EV=40,000
Earned Value (EV) = $40,000 (Actual work completed in terms of budget)

3. Actual Cost (AC)

Actual Cost (AC) = $50,000 (Total money spent so far)

4. Cost Variance (CV)

CV=EV−AC
CV=40,000−50,000
CV=−10,000
Cost Variance (CV) = -$10,000 (Project is over budget)

5. Schedule Variance (SV)

 SV=EV−PV
SV=40,000−50,000
SV = -10,000
Schedule Variance (SV) = -$10,000 (Project is behind schedule)

6. Cost Performance Index (CPI)

CPI=EV/AC
CPI=40,000/50,000
CPI=0.80

CPI = 0.80 (Less than 1 → Project is inefficient and over budget)

7. Schedule Performance Index (SPI)

SPI=EV/PV
SPI=40,000/50,000
SPI=0.80

SPI = 0.80 (Less than 1 → Project is behind schedule)

10. A project has 10 work packages, and each work package is estimated to take 1
month to complete. The first 5 work packages are estimated to cost $12,000 each, and
the next 5 work packages are $8,000 each. At the end of month 5, the first 4 work
packages were completed at the cost of $48,000. What is PV, EV and AC of the project
at the end of month 5?

ANS:

Given Data:

 Total Work Packages = 10

 Duration per Work Package = 1 month
 Total Duration = 10 months
 Cost of First 5 Work Packages = $12,000 each
 Cost of Last 5 Work Packages = $8,000 each
 Total Budget (BAC) Calculation:
o First 5 packages: 5×12,000=60,0005 \times 12,000 = 60,0005×12,000=60,000
o Last 5 packages: 5×8,000=40,0005 \times 8,000 = 40,0005×8,000=40,000
o Total Budget (BAC) = 60,000 + 40,000 = $100,000
 Time Elapsed = 5 months
 Work Completed = 4 work packages
 Actual Cost (AC) = $48,000

1. Planned Value (PV)

 Planned Value (PV) is the budgeted cost of scheduled work at a given time.
 Since 5 months have passed, the planned completion is 5 work packages.
  PV=Budget for First 5 Packages=5×12,000PV = \text{Budget for First 5 Packages} =
5 \times 12,000PV=Budget for First 5 Packages=5×12,000 PV=60,000PV =
60,000PV=60,000
 Planned Value (PV) = $60,000

2. Earned Value (EV)

 Earned Value (EV) is the budgeted cost of actual work completed.

 Since 4 work packages have been completed, and all are part of the first 5 (each
costing $12,000):
 EV=4×12,000EV = 4 \times 12,000EV=4×12,000 EV=48,000EV =
48,000EV=48,000
 Earned Value (EV) = $48,000

3. Actual Cost (AC)

 Actual Cost (AC) is the total amount spent on the work so far. Given:
 AC = $48,000

S – CURVE
11. Suppose you have a budgeted cost of a project at $9,00,000. The project is to be
completed in 9 months. After a month, you have completed 10 percent of the project at
a total expense of $1,00,000. The planned completion should have been 15 percent.
Draw the S-curve and tracks progress of project.

ANS:
Step 1: Given Data
 Planned Duration = 8 months
 Planned Monthly Cost = $10,000
 Total Budget (BAC) = 8×10,000=80,0008 \times 10,000 = 80,0008×10,000=80,000
 Time Elapsed = 2 months
 Actual Cost (AC) after 2 months = $40,000
 Work Completed = 30%
 Planned Progress after 2 months = 28×100=25%\frac{2}{8} \times 100 = 25\%82
×100=25%
Step 2: Calculate Key Project Metrics
1. Planned Value (PV)
 PV=BAC×Planned Progress/ 100
 PV=80,000×0.25=20,000
2. Earned Value (EV)
 EV=BAC×Actual Progress/100
 EV=80,000×0.30=24,000
3. Schedule Performance Index (SPI)
 SPI=EV/PV=24,000/20,000=1.2
  Since SPI > 1, the project is ahead of schedule.

4. Cost Performance Index (CPI)

 CPI=EV/AC=24,000/40,000=0.6
 Since CPI < 1, the project is over budget.

Step 3: Calculate Critical Ratio (CR)

 CR=SPI×CPI
 CR=1.2×0.6=0.72
Step 4: Interpretation of Critical Ratio
 CR > 1 → Project is in excellent condition.
 CR = 1 → Project is on track.
 CR < 1 → Project is in trouble.
Since CR = 0.72 (< 1), the project is at risk due to cost overruns, even though it is
ahead of schedule. Immediate cost control measures are required.
Step 5: Overall Progress Assessment
Ahead of schedule (SPI = 1.2)
Over budget (CPI = 0.6)
Risky status (CR = 0.72)

CRITICAL RATIO
12.Suppose you are managing a software development project. The project is expected
to be completed in 8 months at a cost of $10,000 per month. After 2 months, you realize
that the project is 30 percent completed at a cost of $40,000. Calculate the Critical Ratio
of project, and identify the overall progress of the project?
ANS:
Given Data:
 Total Duration = 8 months
 Total Budget (BAC) = $10,000 × 8 = $80,000
 Time Elapsed = 2 months
 Planned % Completion = 28×100=25%\frac{2}{8} \times 100 = 25\%82×100=25%
  Actual % Completion = 30%
 Actual Cost (AC) = $40,000

Step 1: Calculate PV (Planned Value)

PV=80,000×0.25
PV=20,000
Planned Value (PV) = $20,000

Step 2: Calculate EV (Earned Value)

EV=80,000×0.30
EV=24,000
Earned Value (EV) = $24,000
Step 3: Calculate SPI (Schedule Performance Index)
SPI=EV/PV
SPI=24,000/20,000
SPI=1.2
SPI = 1.2 (Ahead of schedule)
Step 4: Calculate CPI (Cost Performance Index)
CPI=EV/AC
CPI=24,000/40,000
CPI=0.6
CPI = 0.6 (Over budget)
Step 5: Calculate Critical Ratio (CR)
The Critical Ratio (CR) is calculated as:
CR=SPI×CPI
CR=1.2×0.6
CR=0.72
Overall Progress of the Project
 SPI > 1 (1.2) → Project is ahead of schedule (faster than planned).
 CPI < 1 (0.6) → Project is over budget (spending more than expected).
 CR < 1 (0.72) → Project performance is below expectation (budget inefficiency).
 SESSION 23

1.You are managing a project which is into six months of its execution. You are now
reviewing the project status after the completion of four months. Project consists of two
activities: Activity A and B. The actual cost of activity A is $ 2,00,000 and that of
activity B is $ 1,00,000. The planned value of these activities are $ 1,80,000 and $ 80,000
respectively. The Activity A is 60% completed. However, Activity B is only 55%
completed. Calculate the schedule performance index and cost performance index of the
project on the review date and comment on the status of project.

ANS:
Given Data:
 Activity A:
o Actual Cost (AC_A) = $200,000
o Planned Value (PV_A) = $180,000
o % Completed = 60%
 Activity B:
o Actual Cost (AC_B) = $100,000
o Planned Value (PV_B) = $80,000
o % Completed = 55%

Step 1: Calculate Earned Value (EV) for each activity:

Activity A:
EVA=180,000×0.60=108,000
Activity B:
EVB=80,000×0.55=44,000
Total Earned Value (EV) for the project:
EV=EVA+EVB
108,000+44,000=152,000
Step 2: Calculate Planned Value (PV) for the project:
PV=Planned Value of A+ Planned Value of B
PV=180,000+80,000=260,000
Step 3: Calculate Actual Cost (AC) for the project:
AC=ACA+ACB=200,000+100,000= 300,000

Step 4: Calculate Schedule Performance Index (SPI):

SPI=EV/PV
SPI=152,000/260,000=0.5846
SPI = 0.585 (Project is behind schedule because SPI < 1)
 Step 5: Calculate Cost Performance Index (CPI):
CPI=AC/EV
CPI=152,000/300,000=0.5067
Project Status:
 SPI < 1 (0.585) → Behind schedule: The project is only 60% completed in terms of
the planned value, instead of the expected 76%.
 CPI < 1 (0.507) → Over budget: The project has spent more than planned for the
work completed so far.

The project is behind schedule and over budget.

 SPI < 1 means that the project is taking longer than expected to complete.
 CPI < 1 indicates that the project is consuming more resources (money) than
anticipated to complete the work.
2. Given a project with the following characteristics, answer the following questions:
– You are the project manager of a project to build fancy birdhouses.
– You are to build two birdhouses a month for 12 months.
– Each birdhouse is planned to cost $100.
– Your project is scheduled to last for 12 months.
– It is the beginning of month 10.
– You have built 20 birdhouses and your CPI is .9091
ANS:
Given Information:
 Planned Work: Build 2 birdhouses per month for 12 months = 24 birdhouses total.
 Planned Cost per Birdhouse: $100.
 Total Planned Budget (BAC): 24×100=2,40024 \times 100 = 2,40024×100=2,400
 Current Month: Beginning of Month 10.
 Completed Work: 20 birdhouses.
 CPI: 0.9091.
Now, let's calculate the various project performance metrics.
1. Planned Value (PV):
Planned Value (PV) is the budgeted cost for the work scheduled up to the current time.
 Planned work up to Month 10: 2 birdhouses per month for 9 months = 18
birdhouses.
 Planned Value (PV) = 18 birdhouses × $100 = $1,800.
So, PV = $1,800.
2. Earned Value (EV):
Earned Value (EV) is the budgeted cost of the actual work completed.
 Actual work completed: 20 birdhouses.
 Earned Value (EV) = 20 birdhouses × $100 = $2,000.
So, EV = $2,000.
3. Actual Cost (AC):
To calculate Actual Cost (AC), we can use the CPI formula:
CPI=EV/AC
Rearranging the formula to solve for AC:
AC=EV/CPI
AC=2000/0.90912=2,200
So, AC = $2,200.
4. Schedule Variance (SV):
Schedule Variance (SV) indicates how much ahead or behind schedule the project is.
SV=EV−PV
SV=2,000−1,800=200
So, SV = +$200, meaning the project is ahead of schedule by $200.
5. Cost Variance (CV):
Cost Variance (CV) shows how much under or over budget the project is.
CV=EV−AC
CV = 2,000 - 2,200 = -200
So, CV = -$200, meaning the project is over budget by $200.
6. Cost Performance Index (CPI):
Given in the problem, the CPI is 0.9091.
So, CPI = 0.9091. Since CPI < 1, the project is not cost-efficient and is over budget.
7. Schedule Performance Index (SPI):
Schedule Performance Index (SPI) indicates the efficiency of time utilization.
SPI=EV/PV
SPI=1,800/2,000=1.1111
So, SPI = 1.1111, which means the project is ahead of schedule.
(i) Assuming that the COST variance experienced so far in the project will continue, how
much more money will it take to complete the project?
A. $400 B. $440 C. $2800 D. $2840.
To determine how much more money will be required to complete the project, we calculate
the Estimate to Complete (ETC) using the formula:
ETC=BAC−EV/CPI
Given Data:
 Total Budget (BAC) = $2,400
 Earned Value (EV) = $2,000
 CPI = 0.9091
Step 1: Calculate ETC
ETC=2,400−2,000/0.9091=440
ETC = $440

3. You have a project to build a new fence. The fence is four sided. Each side is to take
one day to build and is budgeted for $1,000 per side. The sides are planned to be
completed one after the other. Today is the end of day three. Calculate PV, EV, AC, CV,
CPI, SV, SPI, CR with following information.
ANS:
Given Data:
 Total project duration: 4 days
 Budget per side: $1,000
 Total Budget (BAC): 4×1,000=4,0004 \times 1,000 = 4,0004×1,000=4,000
 Current day: End of day 3

1. Planned Value (PV)

PV is the budgeted cost for the work scheduled to be completed by now.
 By the end of Day 3, 3 sides should have been completed.
 Planned Value (PV) = 3 × $1,000 = $3,000.
2. Earned Value (EV)
EV is the budgeted cost of actual work completed.
 Side 1 (Completed) → EV = $1,000
 Side 2 (Completed) → EV = $1,000
 Side 3 (50% Completed) → EV = 50% × $1,000 = $500
 Side 4 (Not Started) → EV = $0
EV=1,000+1,000+500+0=2,500
EV = $2,500
3. Actual Cost (AC)
AC is the actual amount spent so far.
 Side 1: $1,000
 Side 2: $1,200
 Side 3: $600
 Side 4: $0
AC=1,000+1,200+600+0=2,800AC = 1,000 + 1,200 + 600 + 0 =
2,800AC=1,000+1,200+600+0=2,800
AC = $2,800
4. Cost Variance (CV)
CV measures cost performance:
CV=EV−AC
CV=2,500−2,800=−300
CV = -$300 (Project is over budget)
5. Cost Performance Index (CPI)
CPI measures cost efficiency:
CPI=EV/AC
CPI=2,800/2,500=0.8928
CPI = 0.893 (CPI < 1 → Project is over budget)

6. Schedule Variance (SV)

SV measures schedule performance:
SV=EV−PV
SV=2,500−3,000=−500
SV = -$500 (Project is behind schedule)
7. Schedule Performance Index (SPI)
SPI measures schedule efficiency:
SPI=EV/PV
SPI=3,000/2,500=0.8333
SPI = 0.833 (SPI < 1 → Project is behind schedule)
8. Critical Ratio (CR)
CR is the overall project performance indicator:
CR=SPI×CPI
CR=0.833×0.893=0.744
CR = 0.744 (Project performance is below expectations)

Project Status & Recommendation:

Project is over budget and behind schedule.
 CPI < 1 → Project is spending more than planned.
 SPI < 1 → Project is progressing slower than planned.
 CR < 1 → Project performance is below expectations.

PRSOJECT COST ESTIMATION

1. Consider the case of construction, where one resource will be tasked to perform
multiple iterations of a similar nature (e.g., fitting, riveting, and squaring). The worker
must do a total of 15 of these activities to reach the steady state. Also assume that the
time estimated to perform the last iteration (the steady state) is 1 hour, and we know
from past experience the learning rate for this highly repetitive activity is 0.60. Identify
the time necessary to complete the first activity?
ANS:
2. A manufacturer of diesel locomotives needs 50,000 hours to produce the first unit. Based on
past experience with similar products, you know that the rate of learning is 80 percent. Estimate
% of time saved to manufacture 40th unit compare to first unit
ANS:
3.A construction company executive just started a new company called
Cookie-Cutter Homes. The company only makes one home type, so as to
maximize the learning curve effect. The entrepreneur assumes that his
company will realize a 75 per cent learning curve effect. The first home
took 200 days to complete. How long will it take to produce the 5th home?
How about the 10th home?
ANS: