Cost variance CV : This calculation shows whether the task is over or under budget. If the answer is negative, the task is over budget. Cost performance index CPI : This calculation determines the efficiency of the work being performed on the task. Once the calculations for schedule and cost have been completed for all tasks on the schedule, we can begin the process of forecasting.
There are four additional calculations that help project teams predict the future performance of each task. Estimate to complete ETC : This is the estimated costs required to complete a task.
It calculates only the future costs from this point forward, not the total costs for a task. It can be based on the existing budget for the task or can be calculated using a revised budget value. Estimate at completion EAC : This is the total expected cost for the completion of a task. Variance at completion VAC : This calculation forecasts what the cost variance will be at the completion of the task.
To complete performance index TCPI : This calculation provides the efficiency level that the team will need to achieve in order to finish the task on time. Once all the calculations have been completed for each task on the schedule, a detailed report can be created. Overall project calculations can be completed based on task values, giving the project team an overall look at the schedule and budget variances. Using this information teams can update cost estimates and schedules to include the realities of the project.
Teams can also assess where schedule and cost problems are occurring in an attempt to address them through improved efficiency. Individual tasks can be analyzed and reviewed to determine why the task is over budget or behind schedule. Lessons learned from these investigations can be transferred to other projects or used later on. In this example, the earned value report shows that the project is over budget and behind schedule.
Many contractors assess their projects based on gut feelings or final cost reports. By analyzing costs and schedules during the project, teams can actively address delays and cost overruns before the project is finished. They can also respond to issues on the project more quickly when they are identified sooner. How does a construction company that builds and later sales houses on installments recognize its income?
Which type of Accounting software is idea for this type of business for COA setup? Thank you and Waiting. Is there a difference that will hurt my business? Under contract it says that the seller paid the money to escrow to be disbursed by the attorney to the buyer. My impression is that the attorney will pay View Profile.
The vertical axis is the traditional SV approach. The dollarized SV equation is below:. CPI shows the efficiency with which the project is spending funds. It computes as follows:. CPI is a particularly important EVM metric, because past performance can be used to accurately determine final performance requirements to meet financial goals. Again, SPI can be computed from time units or the more traditional monetary units. The dollarized SPI equation is as follows:. This equation algebraically simplifies to the below:.
Again, this is the most optimistic estimate of final project cost when you consider that past overruns are not recoverable and future problems and realized risk may still occur. Our EAC, assuming current fund spending efficiency, is greater than the BAC, so this project at conclusion will be overspent.
The TCPI equation is as follows:. Our pier piling project TCPI is 1. The current CPI is 0. The increase in performance required to achieve our target is 1. The required percent increase in performance is 0. Not good! This would be very difficult to achieve.
Achievement of these parameters requires assigning tasks costs and setting a baseline. Note, in particular, that the PV requires progressing the schedule; PV values populate up to the status date. Adjust the actual costs, accordingly, if the spending does not go precisely as planned. After progressing the schedule and updating the actual costs EVM analysis is possible. This analysis includes computation of the EAC, which provides to the most optimistic estimate of final project cost.
All these mentioned tabulated earned value metrics are available in Microsoft Project. We have in Figure 1 our demonstration project schedule. Figure 1 This schedule records the required effort to install pilings for construction of a pier. Figure 2 In the set baseline dialog toggle set baseline and choose baseline from the drop down menu, Figure 3.
Figure 3 Select OK. Figure 4 The resulting schedule is displayed in Figure 5. Figure 6 In the more tables dialog, Figure 7, we choose the earned value table and click apply. Figure 7 Now our project and tabulated earned value data is displayed in Figure 8. Figure 8 Because we have not yet progressed the schedule most of the variable cells are not populated.
Figure 9 We now continue and progress the project, Figure Also, because there is often a gap between gathering information and having time to enter it into MS Project, a status date allows you to specify the date on which you collected the data.
We are going to look at the Earned Value table as it contains the majority of information we need for our analysis. The Earned Value table uses abbreviated column headings which can appear quite daunting to start with, so here are some definitions for you. This is the cost of the task as originally planned for.
The cost is calculated up to the status date. In the example below the status date has been set at exactly half way through the task Code Back End. You can see that the PV value is exactly half of the Budgeted at Completion BAC value which is the baseline cost of the task when completed. This indicates that no work has actually been performed — so we are behind on our schedule. Earned value looks at the percentage of the work actually completed and tells us how much that work costs according to the baseline.
So if half of the work has been completed and the status date is set at halfway through the task then the PV, EV and Actual Cost AC values will all be the same assuming no additional costs have been incurred. In this example the status date is exactly half way through the task Code Back End. Half the work has been recorded as being complete.
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