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ProblemSet5.docx.docxWEEK FIVE PROBLEM SET 5
Problem Set Five
Earned-value analysis. A project budget calls for the following expenditures:
|
Task |
Date |
Budgeted Amount |
|
Build forms |
April 1 |
$10,000 |
|
Pour foundation |
April 1 |
$50,000 |
|
|
May 1 |
$100,000 |
|
Frame walls |
May 1 |
$30,000 |
|
|
June 1 |
$30,000 |
|
Remaining tasks |
July 1 and beyond |
$500,000 |
Define each term in your own words, calculate these values for the above project, and show your work:
1) Budgeted cost baseline (make a graph illustrating this one)
This is the initial budget that is planned for a period of time. Budgeted cost baseline graph is illustrated below using the data that is listed in the below table.
|
Task |
Date |
Cumulative costs |
|
Build forms |
April 1 |
$10,000 |
|
Pour foundation |
April 1 |
$60,000 |
|
|
May 1 |
$160,000 |
|
Frame walls |
May 1 |
$190,000 |
|
|
June 1 |
$30,000 |
|
Remaining tasks |
July 1 and beyond |
$500,000 |
2) Budget at completion (BAC)
Budget at completion of the project is the total cost of the project which is $720,000 and it is illustrated in the below table.
|
Task |
Date |
Budgeted Amount |
|
Build forms |
April 1 |
$10,000 |
|
Pour foundation |
April 1 |
$50,000 |
|
|
May 1 |
$100,000 |
|
Frame walls |
May 1 |
$30,000 |
|
|
June 1 |
$30,000 |
|
Remaining tasks |
July 1 and beyond |
$500,000 |
|
Total |
$720,000 |
3) Planned value (PV) as of May 1
Planned value is "the amount of work that should have been done by a particular date" ("The amount of work"…, Watts, 2014). For this problem the planned value as of May 1 is the addition of budgeted amount for build forms, pour foundation and frame walls until May 1.
Therefore the PV as of May 1 is $190,000.
4) Earned value (EV) as of May 1 if the foundation work is only two-thirds complete. Everything else is on schedule.
The actual work accomplished for the budgeted cost is earned value. Earned value as of may 1 is calculated in the below table.
|
Task |
Date |
Budgeted Amount |
Earned Value |
|
Build forms |
April 1 |
$10,000 |
$10,000 |
|
Pour foundation |
April 1 |
$50,000 |
2/3($50,000)=$33,333.33 |
|
|
May 1 |
$100,000 |
2/3($100,000)=$66,666.67 |
|
Frame walls |
May 1 |
$30,000 |
$30,000 |
|
Total Earned Value |
|
|
$140,000 |
5) SV as of May 1.
Schedule variance is calculated as difference between EV and PV(Watts, 2014).
SV=EV-PV
Earned value as of May 1 is $140,000 and planned value as of May 1 is $190,000. Therefore, schedule variance as of May 1 is
$140,000-$190,000= ($50,000)
As the schedule variance value is negative this indicates that the project is behind the schedule.
6) Actual cost as of May 1 is $160,000. Calculate the cost variance (CV) as of May 1.
Cost of variance is the difference between earned value and actual cost and is represent in the mathematical format below(Watts, 2014).
Cost of variance (CV)= Earned Value(EV)-Actual Cost(AC)
$140,000-$160,000=($20,000)
This negative value of CV indicates that project is over budget.
7) Schedule performance index (SPI)
Schedule performance index gives an idea of how much project is completed by dividing the earned value to the planned value (Watts, 2014).
SPI=EV/PV
$140,000/$190,000=0.74
Based on the understanding of SPI and per the text book it is clear that if SPI value less than one that means project is behind the schedule.
8) Cost performance index (CPI)
Cost performance index is used to assess the project performance or efficiency of a project. It is the ration of earned value to the actual cost (Watts, 2014).
CPI=EV/AC
$140,000/$160,000=0.88
As the value of CPI is less than 1 this shows that project is over budget.
9) Estimate to complete (ETC), assuming that the previous cost variances will not affect future costs
Estimate to complete gives an idea of how much budget it will for the remaining activities in a project (Watts, 2014).
ETC=Budget at completion-Earned Value
For this project BAC=$720,000 and the Earned value=$140,000
ETC=$720,000-$140,000
Therefore, estimate to complete the project is $580,000.
10) Estimate at completion (EAC)
Estimate at completion is the total cost of completing all activities and expresses as sum of actual cost and estimate to complete (Watts, 2014).
EAC=Actual cost + Estimate to complete.
$160,000+$580,000=$740,000
Cumulative costs 1-Apr 1-Apr 1-May 1-May 1-Jun July 1 and beyond 10000 60000 160000 190000 220000 720000
