Hopefully you’ve been following our series on PMP calculations.
So you will know that one of the areas that people often struggle with when studying for the PMP is the calculations involved with the Cost Management knowledge area.
This post is about Earned Value. Otherwise known as EV.
Tip – EV is also known as Budgeted Cost of Work Performed (BCWP).
So what is Earned Value? EV is the estimated value of the work completed by your project as of today.
So if the project stopped today, the EV would show the value that it has produced.
Understanding Earned Value is vital as it’s used in many of the other calculations that you will need to know to master the PMP exam.
It’s used to calculate:
- Cost Variance (CV)
- Schedule Variance (SV)
- Cost Performance Index (CPI)
- Schedule Performance Index (SPI)
- To Complete Performance Index (TCPI)
How is EV calculated? Here’s the formula.
Earned Value (EV) = Percent Complete * Budget At Completion
Let’s see an example.
Rohit is the project manager on a project to build a new cricket stadium in Mumbai, India.After six months of work, the project is 27% complete. The estimated total cost of the project is expected to be $50,000.000.
What is the EV?
How did we calculate this?
The Percent Complete = 27%.
From our previous blog post, we know that the BAC is the estimated total cost of the project. So in this case, BAC = $50,000,000.
With these figures we can calculate the EV.
EV = 27% * $50,000,000 = $13,500,000
That was easy, right?
Next in the PMP calculation series is Cost Variance (CV).
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