Question

You are given the following information for a one-year project: Planned Value (PV) = $23,000, Earned Value (EV) - $20,000, Actual Cost (AC) = $20,000, and Budget at Completion (BAC) = $120,000.

Answer 1

1.Estimate at Completion (EAC) is a forecasting tool in project management.

Forecasting helps predict the future performance of projects. It is based on the past performance of the project and objective data. With this information in hand, you can guess future progress and find early indications of a deviation.

We have three forecasting techniques in project management:

1. Estimate at Completion (EAC)
2. Estimate to Complete (ETC)
3. To Complete Performance Index (TCPI)

The project is doing not at par with in accordance with Budget that is estimated at completion .Since the planned value exceeds the earned value leading to over budget and Schedule Performance Index is less than one.

Schedule Performance Index(SPI)= Earned Value/Planned Value

=$20,000/$23000

=0.87

Cost Performance Index(CPI)= Earned Value/Actual Cost

=$20,000/20,000

=1

2.

Budget at Completion (BAC) = $120,000

Actual Cost (AC) = $20,000

Earned Value (EV) = $20,000

Planned Value (PV) = $23,000

To calculate the EAC, first we have to calculate the CPI and SPI:

SPI = EV / PV

= 20,000 / 23,000

= 0.87

CPI = EV / AC

= 20,000 / 20,000

= 1

EAC = AC + (BAC – EV) / (CPI * SPI)

= 20,000 + (120,000 –20,000) / (1 * 0.87)

= 200,00 + 100,000 / 0.87

= 20,000+1,14,942.50

=$134,942.50

Since the actual cost at completion is exceeding the budget cost at completion ,the project is not performing better as the budget is exceed with $14,492,5 which is 12% more than cost that was budgetted.