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Worked Examples

The document provides formulas and examples for calculating key project management metrics including Cost Variance (CV), Cost Performance Index (CPI), Schedule Variance (SV), and Schedule Performance Index (SPI). It explains how to assess project performance in terms of cost and schedule, with specific examples illustrating how to compute these metrics. Additionally, it includes practice questions related to project management scenarios to reinforce understanding of the concepts presented.

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8 views

Worked Examples

The document provides formulas and examples for calculating key project management metrics including Cost Variance (CV), Cost Performance Index (CPI), Schedule Variance (SV), and Schedule Performance Index (SPI). It explains how to assess project performance in terms of cost and schedule, with specific examples illustrating how to compute these metrics. Additionally, it includes practice questions related to project management scenarios to reinforce understanding of the concepts presented.

Uploaded by

smacasuba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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WORKED EXAMPLES

Cost Variance: CV = EV – AC
Cost Performance Index: CPI = EV/AC
Schedule Variance: SV = EV – PV
Schedule Performance Index: SPI = EV/PV
Schedule Variance (SV)

Schedule Variance shows the difference between where we planned to be and where we are
actually in the schedule. In fact, it tracks whether we are behind, ahead or on schedule with the
project. Schedule Variance is calculated as a difference between Earned Value and Planned
Value.

SV = EV – PV

1. EV = $3,000 PV= $3,500

SV= $3,000 – $3,500

SV= – $500

2. EV = $3,000 PV=$2,000

SV = $3,000-$2,000

SV=$1,000

3 EV = $3,000 PV=$3,000

SV=$3,000 – $3,000

SV=0

Schedule Performance Index (SPI)


Schedule Performance Index shows the rate at which the project performance is meeting
schedule expectations up to a certain point in time. It gives the project manager to see the overall
schedule efficiency of the project. SPI is calculated if you divide Earned Value by the Planned
Value.

SPI=EV/PV

The task is behind schedule if SPI is smaller than 1. SPI <1

For example,
EV=$3,000 PV=$3,500 SPI=$3,000/$3,500 SPI =0.85

In this example, SPI is 0.85, and the task is 28% behind schedule.

The task is ahead of schedule if SPI is bigger than 1. SPI >1

For example,
EVpert=$3,000 PV=$2,500 SPI=$,3000/$2,500 SPI=1.2

In our example, the SPI is 1.2 which means that the task is 40% ahead of schedule.

The task is on schedule if SPI equals 1. SPI=1

For instance,
EV= $3,000 PV=$3,000 SPI=$3,000/$3,000 SPI=1

Cost Variance (CV)

Cost Variance is the difference between what was planned to spend, and what was actually
spend. It shows the amount of the value that you earned on an activity and the actual cost that
was required to performed that task. The Cost Variance shows the project manager how far the
task is over, under, or on budget.

CV = EV – AC

The task is over budget if CV is negative.

For instance,
EV = $3,000 AC= $3,500 CV = $3,000 – $3,500 CV= – $500

The task is under budget if CV is positive.


For instance,
EV = $3,000 AC = $2,500 CV=$3,000-$$2,500 CV= $500

The task is on budget if CV is zero.

For instance,
EV=$3,000 AC=$3,000 CV=$3,000-$3,000 CV=0

Cost Performance Index (CPI)

Cost Performance Index is the rate at which project performance is meeting planned costs during
a specific period of time. It shows project managers not only how much money is spending to
deliver a project, but also how well that money is spent. CPI is calculated as a ratio of the Earned
Value to the Actual Cost.

CPI= EV/AC

The task is over budget if CPI is under 1. CPI <1

For example,
EV = $3,000 AC = $3,500 CPI = $3,000/$3,500 CPI= 0.85

In this example, CPI is 0.85 which means that the task is 28% over budget.

The task is under budget of CPI is over 1. CPI > 1

For example,
EV=$3,000 AC =$2,500 CPI=$3,000/$2,500 CPI =1.2

In our example, CPI is 1.2 which means that the task is 40% under budget.

The task is on budget if CPI equals 1. CPI = 1


EV = $3,000 AC=$3,000 CPI=$3,000/$3,000 CPI= 1
Let’s assume a 12-month railway project that is planned to spend
$3M per month for a total budget at completion (BAC) of $36M. The
project is 2 months along and according to the planned vs. actual
cost figures is underspent by 50%.
We could assume therefore that the project is going well because
it’s costing less than planned.
But after 2 months of work, 10 % of work has been completed so
“EV” is 10% of the total $36M budget, which is $3.6M.
Budget at Completion (BAC) : $36M
Planned Value (PV) for 2 Months: $6M
EV: $3.6M
Actual Cost (AC): $3M
Schedule Variance (SV) : (Earned Value – Planned Value) = $3.6 – $6
= – $2.4 Behind the schedule
Cost Variance (CV): (Earned Value – Actual Cost) = $ 600K Under
Budget
Cost Performance Index (CPI): (Earned Value / Actual Cost) = 1.2
Schedule Performance Index (SPI): (Earned value / Planned value) =
0.6
Estimate at Completion (EAC) : (Budget at Completion / Cost
Performance Index) =$30M

2. You are a project manager working on a small marketing project to launch


a new ad campaign. If earned value (EV) =350, actual cost (AC)=400,
planned value (PV) =325. What is cost variance (CV)?

A. 350
B. -75
C. -50
D. 400
3. You are a new project manager for your organization. Your project has a
BAC of $250,000 and is expected to last 10 months. Currently, the project is
in month six and is 40 percent complete, but the project was expected to be
60 percent complete by this time. You have spent $125,000 to complete the
work. What is the cost performance index of the project?

A. 0.66
B. 1.25
C. 2
D. 0.8
. You are a Senior Project Manager in your organization and a newly hired
Junior Project Manager comes to you for advice on how to calculate PERT for
their newly assigned project. For PERT analysis, what durations are required?

A. Total Float, Lead time and Lag time


B. Pessimistic, Optimistic and Most likely estimates
C. Best and Worst case estimation
D. Top-down analogous estimates

. You are the Project Manager on a merger and acquisition project. Activity A
(3 days) and activity B (4 days) can start immediately. Activity C (2 days) can
start after A and B are complete. Activity D (5 days) can begin after activity
B is complete. Activity E (6 days) can begin after activity B is complete.
Activity F (4 days) can begin after activities C and D are complete. Activity G
(5 days) can begin after activities D and E are complete. Activity H (4 days)
can begin after activities F and G are complete. What is the float of activity
D?

A. 1 day
B. 2 days
C. 4 days
D. Not enough information

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