Hopefully you’ve been following our series on PMP Exam calculations.
If you have, you’ll 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 how to calculate Estimate To Complete. Otherwise known as ETC.
Estimate To Complete is a prediction of how much more money the project will cost to complete.
Estimate To Complete Formula
The Estimate To Complete is calculated as follows:
Estimate To Complete = Estimate At Completion – Actual Cost
You can read our previous blog posts to find out how to calculate Estimate At Completion and Actual Cost.
Tip – AC is also known as Actual Cost of Work Performed (ACWP).
So you may see the formula written as:
Estimate To Complete = Estimate At Completion – Actual Cost of Work Performed
Estimate To Complete = EAC – ACWP
What does ETC mean?
The result of the Estimate To Complete formula is a dollar amount. (or rupees, pounds etc – you get the point) So what does this amount represent?
Estimate To Complete tells you and the PMO (which may be more important), how much cash you need to finish the project.
This information is crucial when trying to determine the future of a project.
For example, imagine that the company you are working for is having to rationalise its budget by cutting projects.
You are working on a large project whose Actual Cost is $2.3 million. The PMO could say “This project has cost us $2.3 million and isn’t even finished yet. Let’s cut the project – it’s bound to save us money”.
But then you run the numbers and calculate that the Estimate To Complete is $20,000. So you respond by saying “Hey but we only need $20,000 to finish the project. And the Earned Value of the project is $3.4 million. So cutting the project makes no sense.”
The PMO agree, the project is saved and everyone loves you! (Well you get the idea…)
Example of Calculating Estimate To Complete
Lets see an example.
Joe is the project manager for a software development company based in Vancouver. He is managing a project to create a new sports news app. So far the project has spent $430,000. The predicted total cost of the project is $650,000.
What is the Estimate To Complete?
Answer: The Estimate To Complete is $220,000.
How did we calculate this?
Well we know that Estimate To Complete = Estimate At Completion – Actual Cost.
The Estimate At Completion is $650,000.
Tip – the PMP exam may use slightly different descriptions to describe the input to a formula. This is to test your knowledge and make sure you understand what you are calculating. EG “predicted total cost of the project is” is another way of saying Estimate At Completion.
The Actual Cost is $430,000. (“the project has spent” is another way of saying Actual Cost).
Knowing this we can calculate:
Estimate To Complete = $650,000 – $430,000 = $220,000
That wasn’t too hard to calculate, right?
Next in the PMP Exam calculation series is To-Complete Performance Index (TCPI).
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