When to use which EAC formuala

Submitted by Samir on Sun, 04/01/2012 - 06:36

I am confused as when to use which EAC formaula.


PMBoK has given following 3 formulae.


1) EAC=AC+BAC-EV


2) EAC=BAC/cumulative CPI


3)EAC=AC+[(BAC-EV)/ (cumulative CPI * cumulative SPI)]


I didn't understand the explaination provided in PMBoK for these. Could someboy please explain in simple words.


Much appreciated.


 

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sadityas

Mon, 04/02/2012 - 03:46

 Samir, Excellent question and source of confusion to many. ..Let me explain below so you can easily understand and skip any hard-memorization.  

 Assumption 1:  

If calculated cost variance is expected to be same throughout project work. This is also called typical case. For example, our initial estimation was wrong and now we realize that this CPI will exist through the life of project. 

EAC=BAC/cumulative CPI    ............................................................................................................................(2)

(Observation: budget at completion is divided by EAC, i.e. if CPI is a fraction, BAC will increase by that factor!!)

Assumption2:

One time hiccup but you know that rest of the project will not have such corner case. This is also called atypical case. For example, your vendor delayed sending procured items first time but you know it will not happen again.

EAC=AC+BAC-EV       ….....................................................................................................................................(3)

(Observation: in this one time correction case; We have some spike in actual cost so adding current actual cost to cost of remaining work (budget at completion is subtracted by EV to get cost of remaining work) )

Assumption3:

In the assumption (1) and (2) above, we did not consider schedule, if you need to make sure that we will not be able to stretch our schedule, you need to consider SPI (Schedule Performance Index). So if project must need to meet original deadline, you need to calculate EAC like below:

EAC=AC + [(BAC-EV)/ (cumulative CPI * cumulative SPI)] ...............................................................(4)

(Observation: In this formula Actual cost is added to the cost of work remaining (BAC-EV) adjusted by the CPI and SPI)

Check out my blog; I have discussed same in detail: http://www.pmp360.com/cost-forecasting-made-easy

 

HTH;

Shuk

Samir

Mon, 04/02/2012 - 04:49

Very Helpful. Thank you so much!

Samir

Sat, 04/07/2012 - 11:11

Question has only given this much information.


If EV=145, PV=162, AC=138, BAc=200 and ETC=62. what is VAC?


A. 0


B. 7


C. 9.5


D. 62


To calculate VAC, we need to calculate EAC. But which formula to use in this case?

sadityas

Sat, 04/07/2012 - 20:53

I am not huge fan of these kinds of one liner questions. You will see very soon how far they are from real exam questions. Well for these kinds of questions (essentially I consider them crappy as they try to see if you can use formula, a high school kid will do if s/he knows the formula) where no other information is provided, you assume there is typical variance i.e. EAC will reflect current variation throughout the life of project.

i.e. calculate EAC like this:  EAC= BAC/CPI

(I know you are confused in this area of PMP exam :).  When you see no other info given to decide; use this formula mentioned above as a default one. Usually in real exam and good perp. exams, you have information in question to decide how to calculate correct EAC on the basis of this)

So calculate EAC as mentioned above and calculate VAC=BAC-EAC   {+ ive VAC mean project is under budget}

 

 

HTH

Shuk

jamilur

Tue, 02/26/2013 - 10:17

 BAC =200

As ETC is given then can be directly calculated as 

EAC = AC+ETC 

EAC=138+62=200

VAC=BAC-EAC =0

sunitaPMP

Mon, 02/25/2013 - 19:38

Hi satdityas,

So when we appply EAC=AC+ETC(bottom up)scenario?

 

raza82

Tue, 02/26/2013 - 06:12

This explaination will clear all your doubts....

 

http://www.deepfriedbrainproject.com/2009/09/estimate-at-completion-eac-...

deepfriedbrain

Wed, 06/21/2017 - 18:55

Hi,

The link above has a trailing slash which is breaking it. Here's the correct link:

http://www.deepfriedbrainproject.com/2009/09/estimate-at-completion-eac-earned-value.html

mercurie

Tue, 02/26/2013 - 06:21

When your initial estimates is way off, and you decide to do a complete re-estimate.

 

pmalik

Sun, 06/25/2017 - 10:30

Estimate At Completion (EAC) and Estimate To Complete (ETC) are one of the most confusing concepts of PMP Exam. The aspirants find them consfusing because most books concentrate on listing the formulas rather than giving explanation of the EVM concepts.

I have explained EAC and ETC concepts in the folliwing articles. I have not limited myself in just listing down the forumulas. I have also explained the scenarios where & how these formulas could be used. After reading these articles, you would be able to answer PMP questions confidently.

3 Estimate To Complete Formulas

5 Estimate At Completion Formulas

Good luck.