18 Questions
What is the main difference between the cost baseline and the cost budget in project management?
The cost baseline includes management reserves, while the cost budget includes contingency reserves.
Which tool or technique is used to come up with the project cost estimate in project management?
Reserve analysis
What is the primary purpose of Earned Value Management methodology in project management?
Forecast future performance based on current performance
In project management, what does Estimate at Completion (EAC) refer to?
The estimated total cost at project completion
When calculating the cost baseline in project management, what are contingency reserves used for?
To account for known risks that may impact project costs
Why is it cautioned that understanding terms like EAC and other similar definitions in Earned Value Management is important?
To avoid confusion between similar terms that may lead to incorrect project cost estimates
What does a Cost Performance Index (CPI) value of 0.84 indicate?
The project is over budget
If Estimate at Completion (EAC) = AC + (BAC – EV), what does BAC represent?
Budgeted at Completion
What does Schedule Performance Index (SPI) value of 0.84 indicate?
The project is progressing behind schedule
What does Estimate To Complete (ETC) = EAC – AC formula calculate?
Total project cost as of today minus what has been spent to date
When using bottom-up forecasting for Estimate at Completion (EAC), what does EAC = AC + bottom-up ETC represent?
Adding actual costs to bottom-up estimated costs
What does a Cost Performance Index (CPI) value greater than 1 indicate?
The project is under budget
What term is used to describe the budgeted cost for the work planned to be completed by a specific point in time?
Budgeted Cost of Work Scheduled
Which formula is used to calculate Estimate at Completion (EAC)?
(EV / BAC) * 100
What does Schedule Variance (SV) represent?
Difference between earned value and planned value
In project management, what does Cost Variance (CV) indicate?
Difference between planned and actual cost
Which term describes the anticipated total cost of the project at completion?
Budget at Completion
What does ETC (Estimate to Complete) represent in project management?
Outstanding amount needed to complete the project
Study Notes
Earned Value Management
- EAC (Estimate At Completion) is the anticipated total cost of the project at completion.
- ETC (Estimate To Complete) is the amount of money needed to complete the remaining work on the project.
Cost Baseline and Cost Budget
- The cost baseline includes contingency reserves.
- The cost budget includes management reserves in addition to the cost baseline.
- The difference between the cost baseline and the cost budget is the management reserves.
Earned Value Formulas
- CV (Cost Variance) = EV - AC, where negative values indicate over budget and positive values indicate under budget.
- SV (Schedule Variance) = EV - PV, where negative values indicate behind schedule and positive values indicate ahead of schedule.
- CPI (Cost Performance Index) = EV / AC, where values greater than 1 are good (under budget) and values less than 1 are bad (over budget).
- SPI (Schedule Performance Index) = EV / PV, where values greater than 1 are good (ahead of schedule) and values less than 1 are bad (behind schedule).
Estimate At Completion (EAC)
- EAC = AC + (BAC - EV), where BAC is the total project budget.
- EAC is a forecasted value of the project when completed.
- EAC can be calculated using bottom-up manual forecasting for the ETC.
Estimate To Complete (ETC)
- ETC = EAC - AC, where EAC is the estimated cost at completion and AC is the actual cost incurred so far.
- ETC is the remaining amount of money needed to complete the project.
Test your knowledge on project cost estimation concepts like anticipated total cost at project completion (EAC), estimate at completion (EAC) and earned value. Practice questions to understand the difference between cost baseline, cost budget, management reserves, and contingency reserves.
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