Financial Management for Project Managers Earned Value Management 2 — Questions and Answers
Question 1: The Estimate at Completion (EAC) using the most common EVM formula (assuming past CPI continues) is:
- BAC + AC
- BAC / CPI (Correct answer)
- AC + ETC
- BAC - CV
Correct answer: BAC / CPI
EAC = BAC / CPI assumes the cost efficiency experienced so far will continue for the remaining work, projecting the final total cost of the project.
Question 2: Estimate to Complete (ETC) represents:
- The total cost incurred on the project so far
- The expected cost to finish the remaining project work (Correct answer)
- The total authorized budget for the project
- The variance between earned and planned value
Correct answer: The expected cost to finish the remaining project work
ETC is the projected cost of completing the remaining scope of work, calculated as EAC - AC.
Question 3: Variance at Completion (VAC) is defined as:
- EAC - BAC
- BAC - EAC (Correct answer)
- EV - AC
- PV - EV
Correct answer: BAC - EAC
VAC = BAC - EAC; a positive VAC indicates the project is expected to finish under budget, while a negative VAC signals an expected overrun.
Question 4: A project has BAC = $100,000, EV = $40,000, and AC = $50,000. What is the Cost Performance Index (CPI)?
- 0.80 (Correct answer)
- 0.85
- 0.90
- 1.25
Correct answer: 0.80
CPI = EV / AC = $40,000 / $50,000 = 0.80, meaning the project is getting only $0.80 of value for every dollar spent.
Question 5: Planned Value (PV) in EVM represents:
- The actual cost of work completed
- The budgeted cost of work scheduled to be done by a specific point in time (Correct answer)
- The total budget approved for the project
- The forecasted final cost of the project
Correct answer: The budgeted cost of work scheduled to be done by a specific point in time
PV (also called BCWS — Budgeted Cost of Work Scheduled) is the authorized budget for the work planned to be completed at any given point in the project schedule.
Question 6: To-Complete Performance Index (TCPI) based on BAC measures:
- The cost efficiency required on all remaining work to meet the original budget (Correct answer)
- The schedule efficiency needed to finish on time
- The actual cost efficiency achieved to date
- The variance expected at project completion
Correct answer: The cost efficiency required on all remaining work to meet the original budget
TCPI = (BAC - EV) / (BAC - AC); it tells managers what CPI must be achieved on remaining work to hit the original BAC.
Financial Management for Project Managers Earned Value Management 2
The Estimate at Completion (EAC) using the most common EVM formula (assuming past CPI continues) is: