PMP Series - PV, EV, and AC

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PMP Preparation Series-

Project Cost Management

Planned Value (PV)Earned Value (EV) Actual Cost (AC)

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www. Tutioncentral.com Topics Covered• Planned Value(PV)

• Formula to calculate the Planned Value(PV)

• A mathematical Example of Planned Value(PV)

• Earned Value (EV)

• Formula to calculate the Earned Value(EV)

• A mathematical Example of Earned Value(EV)

• Actual Cost(AC)

• Formula to calculate the Actual Cost (AC)

• A mathematical Example of Actual Cost (AC)

• Conclusion

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www. Tutioncentral.com Planned Value (PV)• As per the PMBOK Guide “Planned Value (PV) is the authorized budget

assigned to work to be accomplished for an activity or WBS component.

• Total planned value for the project is also known as Budget at Completion (BAC)

• The Planned Value is the approved value of the work to be completed in a given time period; in other words, it is the money that you should have spent as per the schedule.

• Planned Value is also referred to as the Budgeted Cost of Work Scheduled (BCWS).

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www. Tutioncentral.com Formula to calculate the Planned Value (PV)

Planned Value =

(Planned % Complete) X Budget at Completion (BAC)

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www. Tutioncentral.com A mathematical example (PV)

You have a project to be completed in 12 months and the total cost of the project is $100,000 USD. Six months have passed and the schedule says that 50% of the work should be completed. What is the Planned Value (PV)?GivenProject duration: 12 months Project Cost (BAC): $100,000 USDTime elapsed: 6 months Percent complete: 50% (as per the schedule)The definition of Planned Value says that the Planned Value is the value of the work that should have been completed so far (as per the schedule).• In this case we should have completed 50% of the total work.Hence,Planned Value = 50% of value of the total work= 50% of BAC, = 50% of $100,000 = $50,000Therefore, the Planned Value (PV) is $50,000 USD.

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www. Tutioncentral.com Earned Value (EV)

• As per the PMBOK Guide “Earned Value (EV) is the value of work performed expressed in terms of the approved budget assigned to that work for an activity or WBS Component.”

• In other words, the Earned Value is the value of the work actually completed to date, or you can say that if the project is terminated today, the Earned Value will show you the value that it has produced.

• Earned Value is also known as the Budgeted Cost of Work Performed (BCWP).

• Most important element

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www. Tutioncentral.com Formula to calculate the (EV)

Earned Value =

% of completed work X Budget at Completion (BAC)

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www. Tutioncentral.com A mathematical example (EV)You have a project to be completed in 12 months and the total cost of the project is $100,000 USD. Six months have passed and $60,000 USD has been spent, but on closer review you find that only 40% of the work is completed so far. What is the Earned Value (EV)?

• In the above question, you can clearly see that only 40% of the work is actually completed, and the definition of Earned Value says that it is the value of the project that has been earned.

• Hence, Earned Value = 40% of value of total work= 40% of BAC = 40% of $100,000= 0.4 X $100,000 = $40,000

• Therefore, the Earned Value (EV) is $40,000 USD.

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www. Tutioncentral.com Actual Cost (AC)

• As per the PMBOK Guide “Actual Cost (AC) is the total cost actually incurred in accomplishing work performed for an activity or WBS component.”

• The Actual Cost is the total cost incurred for the actual work completed to date; or simply put, it is the amount of money you have spent to date.

• The Actual Cost is also known as the Actual Cost of Work Performed (ACWP).

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www. Tutioncentral.com Formula to calculate (AC)

• There is no special formula to calculate the Actual Cost.

• It is an amount that has been spent and can be found very easily in the question.

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www. Tutioncentral.com A mathematical Example (AC)

You have a project to be completed in 12 months and the total cost of the project is $100,000 USD. Six months have passed and $60,000 USD has been spent, but on closer review you find that only 40% of the work is completed so far. What is the Actual Cost (AC)?

• As per the definition of Actual Cost, it is the amount of money that you have been spent so far. And in our question, you have spent $60,000 USD on the project so far.

• Hence, The Actual Cost is $60,000 USD.

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www. Tutioncentral.com Conclusion

• Planned Value is the money that you should have spent as per the schedule.

• Earned Value is the value of the work actually completed to date.

• Actual Cost is the amount spent on the project to date

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www. Tutioncentral.com Thanks &

All the Best for a great Career

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Date post:	15-Jul-2015
Category:	Education
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PMP Series - PV, EV, and AC

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