Project Management Earned Value Management (EVM) Questions and Answers — Questions and Answers
Question 1: A project has a Budget at Completion (BAC) of $150,000. At the current status date, the project has an Earned Value (EV) of $60,000 and an Actual Cost (AC) of $75,000. The project manager determines that the current cost variances are atypical and expects the remaining work to be completed at the budgeted rate. Which formula should be used to calculate the Estimate at Completion (EAC)?
- EAC = BAC / CPI
- EAC = AC + (BAC - EV) (Correct answer)
- EAC = AC + Bottom-up ETC
- EAC = AC + [(BAC - EV) / (CPI * SPI)]
Correct answer: EAC = AC + (BAC - EV)
When current variances are considered atypical and not expected to continue, the EAC is calculated by taking the actual costs to date and adding the remaining budget. The formula EAC = AC + (BAC - EV) represents this scenario, as (BAC - EV) is the value of the remaining work.
Question 2: During a monthly project review, the project manager reports a Cost Performance Index (CPI) of 1.15 and a Schedule Performance Index (SPI) of 0.95. Which of the following statements provides the BEST interpretation of these metrics?
- The project is over budget and behind schedule.
- The project is under budget and ahead of schedule.
- The project is over budget and ahead of schedule.
- The project is under budget and behind schedule. (Correct answer)
Correct answer: The project is under budget and behind schedule.
A CPI greater than 1.0 indicates the project is under budget (getting more value than what was spent). An SPI less than 1.0 indicates the project is behind schedule (completed less work than planned). Therefore, a CPI of 1.15 and an SPI of 0.95 means the project is performing favorably on cost but is delayed.
Question 3: A project is halfway through its planned duration. The following data is available: Budget at Completion (BAC) = $200,000; Planned Value (PV) = $100,000; Earned Value (EV) = $80,000; Actual Cost (AC) = $90,000. What is the Cost Variance (CV) for this project?
- $10,000
- -$20,000
- -$10,000 (Correct answer)
- $20,000
Correct answer: -$10,000
The formula for Cost Variance (CV) is EV - AC. Using the provided data: CV = $80,000 - $90,000 = -$10,000. A negative CV indicates that the project is over budget.
Question 4: The To-Complete Performance Index (TCPI) is a crucial EVM metric. What does a TCPI value of 1.2 indicate?
- The project can continue performing at the current CPI and still meet the budget.
- The remaining work must be completed with 20% greater cost efficiency to meet the budget. (Correct answer)
- The project is currently performing 20% under budget.
- The project has 20% of its budget remaining.
Correct answer: The remaining work must be completed with 20% greater cost efficiency to meet the budget.
TCPI represents the cost performance required for the remainder of the project to achieve a specific management goal (like the BAC or EAC). A TCPI greater than 1 means the required efficiency is higher than the current plan. A value of 1.2 means that for every dollar of remaining budget, $1.20 of value must be earned, which is a 20% increase in efficiency.
Question 5: A project manager is analyzing performance data. The Schedule Variance (SV) is calculated to be a positive value. What does this signify about the project's status?
- The project has spent less money than budgeted.
- The project has completed more work than was planned to be completed at this point. (Correct answer)
- The project will be completed under the total budget.
- The project's critical path has been shortened.
Correct answer: The project has completed more work than was planned to be completed at this point.
Schedule Variance (SV) is calculated as Earned Value (EV) minus Planned Value (PV). A positive SV means that the value of the work performed (EV) is greater than the value of the work that was scheduled to be performed (PV), indicating the project is ahead of schedule.
Question 6: A project has a CPI of 0.80. The project manager expects this rate of cost performance to continue for the remainder of the project. If the Budget at Completion (BAC) is $500,000, what is the most likely Estimate at Completion (EAC)?
- $400,000
- $500,000
- $580,000
- $625,000 (Correct answer)
Correct answer: $625,000
When the current cost performance is expected to continue, the formula EAC = BAC / CPI is used. Given a BAC of $500,000 and a CPI of 0.80, the calculation is EAC = $500,000 / 0.80 = $625,000. This forecasts the total project cost based on the current cost efficiency.
Project Management Earned Value Management (EVM) Questions and Answers
A project has a Budget at Completion (BAC) of $150,000.
At the current status date, the project has an Earned Value (EV) of $60,000 and an Actual Cost (AC) of $75,000.
The project manager determines that the current cost variances are atypical and expects the remaining work to be completed at the budgeted rate.
Which formula should be used to calculate the Estimate at Completion (EAC)?