Given the information (below) for a two-year project, answer the following questions. Remember the following terms; planned value (PV), earned value (EV), actual cost (AC), and budget at completion (BAC).

PV

=

$83,000

EV

=

$90,000

AC

=

$96,000

BAC

=

$190,000

a)Explain why earned value management is the preferred method for measuring project performance?

b)Use the formulas provided inTable 2, to calculate the cost variance (CV), schedule variance (SV), cost performance index (CPI), and schedule performance index (SPI) for the project.

c)How is the project doing? Is it ahead of schedule or behind schedule? Is it under budget or over budget?

d)Use the CPI to calculate the estimate at completion (EAC) for this project. Is the project performing better or worse than planned?

e)Use the SPI to estimate how long it will take to finish this project.

Table 2: Earned Value Formulas

Term

Formula

Earned value

EV = PV to date X% complete

Cost variance

CV = EV - AC

Schedule variance

SV = EV - PV

Cost performance index

CPI = EV / AC

Schedule performance index

SPI = EV / PV

Estimate at completion

EAC = BAC / CPI

Estimated time to complete

Original time estimate / SPI

[1+1+1+1+1=5 marks]