Given a project that has a total budget of $470K. It is a 10-month project, repo

Question

Given a project that has a total budget of $470K. It is a 10-month project, reporting status monthly. It is now the end of month 6. For the first six months, $300K was allocated according to the allocatiorn Month 1 Month 2$35K Month 3 $35K Month 4 $50K Month 5 $70K $30K . Month 6 $80K The budget for the remaining four months is $60K, $50K, $35K, and $25K respectively. The actual cost expended in the first six months was $38K, $39K, $42K, $45K, $50K, and $90K, respectively. The value received, in terms of the amount of work planned to be done for each month, was $28K, $32K, $33K, $35K, $45K, and $80K respectively. For each of the six reporting periods, what was the planned value, actual cost, and earned value? a) b) What is the schedule variance and cost variance at the end of each reporting period? c) What is the schedule performance index and cost performance index at the end of each reporting period?

Explanation / Answer

a)

In the question we are given the Planned Value, Actual Cost and the Earned Value for individual months. To calculate the PV,AC, and EV for each reporting period, we have to all the values cumulatively. i.e if we want to calculate Planned Value(PV) for 3rd month, we'll add the values of 1st, 2nd and the 3rd month

The PV,EV and AC for each reporting period are as follows

Planned Value:

1st reporting status - 30k
2nd - 30k + 35k = 65k (1st month + 2nd month)
3rd - 65k + 35k = 100k (1st month + 2nd month + third mionth)... and so on
4th - 100k + 50k = 150k
5th - 150k + 70k = 220k
6th - 220k + 80k = 300k

Actual Cost:

1st - 38k
2nd - 38k + 39k = 77k (1st month + 2nd month)
3rd - 77k + 42k = 119k (1st month + 2nd month + third mionth)... and so on
4th - 119k + 45k = 164k
5th - 164k + 50k = 214k
6th - 214k + 90k = 304k

Earned Value:

1st - 28k
2nd - 28k + 32k = 60k (1st month + 2nd month)
3rd - 60k + 33k = 93k (1st month + 2nd month + third mionth)... and so on
4th - 93k + 35k = 128k
5th - 128k + 45k = 173k
6th - 173k + 80k = 253k

( b )

Schedule Variance:- It indicates how much ahead or behind schedule the project is. It is calculated by the formula

If the SV is negative, it means we are behind schedule, if its positive, it means we are ahead of schedule, and if it is zero, it means we are on schedule

In our case, SV for each reporting period is

1st month -> 28k - 30k = -2k (EV - PV) for first month
2nd month -> 60k - 65k = -5k ... for second month
3rd month -> 93k - 100k = -7k
4th month -> 128k - 150k = -22k
5th month -> 173k - 220k = -47k
6th month -> 253k - 300k = -47k

Cost Variance:- It indicates how much under budget or over budget the project is. It is calculated by the formula

If Cost Variance is positive, this means you are under budget, if its negative, this means you are over budget, and if its zero, this means you are on budget

In our case, the Cost Variance dor each reporting period is:

1st month -> 28k - 38k = -10k (EV - AC) for first month
2nd month -> 60k - 77k = -17k ... for second month
3rd month -> 93k - 119k = -26k
4th month -> 128k - 164k = -36k
5th month -> 173k - 214k = -41k
6th month -> 253k - 304k = -51k

( c )

Schedule Performance Index (SPI):-  It is a ratio of the earned value (EV) to the planned value (PV). It is calculated by the following formula

If SPI is less than 1, it means we are behind schedule. If it's greater than 1, it means we are ahead of schedule, and if it's equal to 1, it means we are on schedule

In our case, the SPI is as follows:

1st month -> 28/30 = 0.93 (EV / PV)
2nd month -> 60/65 = 0.92
3rd month -> 93/100 = 0.93
4th month -> 128/150 = 0.85
5th month -> 173/220 = 0.79
6th month -> 253/300 = 0.84

Cost Performance Index (CPI):- It is a ratio of the earned value (EV) to the actual cost (AC). It is calculated by the following formula

If CPI is less than 1, you are over budget, if it's greater than 1 you are under budget. If it's equal to 1 you are on budget

In our case, the CPI is as follows

1st month -> 28/38 = 0.74
2nd month -> 60/77 = 0.78
3rd month -> 93/119 = 0.78
4th month -> 128/164 = 0.78
5th month -> 173/214 = 0.81
6th month -> 253/304 = 0.83

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