8-4.2.1- solution to previous example

Solution approach: We  first have to prepare a rough schedule that shows when eah task is expected to be done. You will use the schedule to calculate the Planned Value for each task and use the percent complete to determine the Earned value. Let’s calculate the planned value (PV) and earned value (EV) as at the end of 5 weeks. Take task A, it is scheduled to be done in weeks 1 and 2, thus by week 5, its planned value is $20,000. Since it is 100% complete, the earned value is $20,000. Similarly Task B is scheduled for the first 3 weeks so its planned value is $22,000. However, it is only 80% complete and thus its earned value is $17,600 ( i.e. 80% of 22,000). Last, Task E follows Task D and is scheduled for weeks 5, 6, and 7. So at the end of week 5, you expect to have done only 1/3 of task E, i.e., its planned value is $6000. However, 67% (2/3) is already completed and thus the earned value is 2/3 of 18000 which equals 12,000.  Using the same logic the PV and EV for all tasks can be determined and the result is shown below

Task Duration Budget ($000s) Predecessor % Comp Planned Value at 5 wks Earned Value at 5 wks
Conceptual Design (A) 2 20 100% $20,000 $20,000
Graphics Design (B) 3 22 80% $22,000 $17,600
Copyright (C) 3 15 B $10,000 $0
Samples (D) 2 6 A 100% $6000 $6000
Tooling (E) 3 18 D 67% $6000 $12,000
Production (F) 3 22 E $0 $0
Total $103 $64,000 $55, 600

Now we are ready to calculate the performance measures

1.       CV= EV-AC= 55,600-60,000 =  -4,400 ( cost overrun)

2.       SV = EV-PV= 55,600-64,000= -$8400 (behind schedule)

3.       TV (time variance) = -8,400/(64,000/5)= -0.66 ( project is 0.66 weeks behind schedule

4.       CPI= EV/AC= 55,600/60,000= 0.93

5.       SPI= EV/PV= 0.87

6.       Critical ratio (CR) = CPI x SPI = .93x.87= 0.81 ( might need to investigate why poor performance

7.       ETC=( BAC-EV)/CPI= (103,000-55,600)/0.93= $50,968. This is the amount needed to complete if current trend continues

8.       EAC= ETC + AC= 50,968 + 60,000= $110,968; this will be the new cost at completion if trend continues.

60 thoughts on “8-4.2.1- solution to previous example”

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