A homeowner hires a contractor to tile five identical rooms in her home. She pur

Question

A homeowner hires a contractor to tile five identical rooms in her home. She purchased the tiles. The contractor is only being paid for his labor. Because the tiles are unusually shaped and hard to install, he assumes two days per room. His rate is $100 per hour. Overtime will be paid at the same rate. The planned cost is $8,000. Assumption: 1 work day = 8 hours

Provide the information that will be presented to the homeowner at the end of the first week including: Planned Value, Earned Value, Budget at Completion, Cost Variance, Schedule Variance, Variance at Completion, Cost performance Index, Schedule Performance Index, Estimate at Completion, and Estimate to Complete.

You MUST show ALL of your work.

Explanation / Answer

As there are no hiccups and project is on schedule, we assume that there would be no overtime.

1 week = 7 days

2 days per room.

Total estimated cost = 10(days)*8(hrs per day)*$100(rate per hr) = $8000

Also in 7 days the percentage of work completed = 7(days)/10 (days) *100%=70%

Cost incurred = 8(hrs per day) *7 (days) * $100 (rate per hr) =$5600

Planned Value (PV): Budget assigned to complete the work = $8000

Earned Value (EV): Estimated work accomplished = $5600

Actual Cost Incurred (AC) = $5600 ( as there are no hiccups)

Budget at Completion: Estimated value of the project = $8000

Cost Variance (CV): EV-AC= $5600-$5600= 0 (meaning on budget)

Schedule Variance (SV): EV-PV= $5600-$8000= - $2400 (indicating work is still left)

Cost Performance Index (CPI): EV/AC = $5600/$5600= 1 (Project is on budget)

Schedule Performance Index (SPI): EV/PV = $5600/$8000= 0.7 (meaning work is still left)

Estimate at Completion (EAC): As we don’t have any overruns we use this formula BAC/CPI = $8000/1= $8000

Estimate to Complete (ETC):   EAC – AC = $8000-$5600= $2400 ( budget left)

Variance at completion: BAC – EAC = $8000-$8000 = 0 (means there are no variances)

Note : Variance at completion is explained on the very last line.

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