ETC Question, please help me to solve it

Submitted by raza82 on Sat, 02/02/2013 - 11:40

You are working on a 12 month assignment to build a website with 4000 pages for $ 1,000,000. You are supposed to spend $ 250,000 every 3 months. After 6 months, you determine that only $ 400,000 of work is completed and cost incurred is $ 800,000. What is the ETC?

 
 
  Choice 1 $ 2,000,000
 
  Choice 2 $ 1,500,000
 
  Choice 3 $ 1,000,000
 
  Choice 4 1,200,000
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PMP / CAPM exam Question bank
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sspawar

Sat, 02/02/2013 - 15:36

 very good question RAZA...

CPI = 0.5

SPI = 0.8

YOUR PROJECT IS TIME (SCHEDULED DATE) CONSTRAINED

HENCE ETC = 600000/ (0.5*0.8) = 1500000 (OPTION 2)

raza82

Sat, 02/02/2013 - 17:06

 Well thats the not the answer given by the simulator...........

sunitaPMP

Sat, 02/02/2013 - 16:44

I think Ans is D)

raza82

Sat, 02/02/2013 - 17:06

Can u explain why plz? 

sunitaPMP

Sat, 02/02/2013 - 17:44

CPI=1/2

BAC=1000,000

EAC=BAC/CPI=2000,000

ETC=EAC-AC=2000,000-8000,000=1200-option D

 

what is teh correct ans?

 

steelproject2012

Sat, 02/02/2013 - 17:58

I thought this formula is used when there ARE NO VARIANCES

But variances do exist for CV(EV - AC = -400)  and SV (EV - PV = -100), right?

sunitaPMP

Sat, 02/02/2013 - 18:05

my thinking on this,

this is fundamentally flawed .In this case we calculate EAC as

EAC=AC+ETC

To calculate EAC i used BAC/CPI

 

 

raza82

Sat, 02/02/2013 - 18:35

Your calculation gives the answer -6000000, not 1200000.

 

 

sunitaPMP

Sat, 02/02/2013 - 18:41

ETC=EAC-AC=2000,000-800,000=1200,000

sunitaPMP

Sat, 02/02/2013 - 18:55

corerction

2,000,000-800,000=1200,000

Is this corerct now?I made mistake in putting 0s.

 

Let em know what is teh correct ans

 

steelproject2012

Sat, 02/02/2013 - 17:55

EV=$400k; PV=$500k, AC=$800k; BAC=$1M;

CPI = EV/AC = 400/800 = 0.5; SPI = EV/PV = 400/500 = 0.8
 
ETC = EAC - AC
 
Since there are variances, we can only use either:
(i) EAC = AC + (BAC - EV)/CPI*SPI. variances are not representative of the future...
             = $800k + ($1m - $400)/(CPI * SPI)
             = $800k + (600k/0.5*0.8)
             = $800k + 600k/0.4 = $2.3m
ETC = $2.3m - 800k = $1.5m (B)
 
OR
 
(ii) EAC = AC + (BAC - EV)...... Varinces are representative of the future
              = $800k + ($1m - $400k)
              = $1.4m
 ETC = $1.4m - $800k = $600k (this ans is not in the option...
Pls confirm where am missing the whole game.
 
 
 
 

 

th9063

Sat, 02/02/2013 - 19:06

 Option 4

EAC=AC+BAC-EV/CPI

CPI=EV/AC

400,000/800,000

=.5

EV=400,000

AC=800,000

BAC=1,000,000

EAC=AC+BAC-EV/CPI

=800,000+(1,000,000-400,000)/.5

=2000000

ETC=EAC-AC

2000000-800000

=1200000

 

steelproject2012

Sun, 02/03/2013 - 03:48

Corrected typo:

(i) EAC = AC + (BAC - EV)/CPI*SPI. ....used if variances are representative (typical) of the future...

(ii) EAC = AC + (BAC - EV)...... used if Varinces are NOT representative (atypical)  of the future
 
(iii) EAC = BAC/CPI......Used if NO variances frm BAC or project will continue at the same rate of spending

Why is no one giving consideration to the constraints b4 applying the formula even though the 3 formulae give different answers.

sspawar

Sun, 02/03/2013 - 04:43

Your query  


ii) --- , 


in options --- atypical , choice is not given.  (as the option may be for = 600000) , hence this formula will not be applicable.


second when in question time constraint is given -- that in 12 month you have to complete this project.


it is must to consider SPI while forecosting  ETC , along with CPI (your query iii - this formula will not be applicable).


once you can leave CPI, but cant leave SPI, because , time constraint is given but typical / atypical trend in terms of CPI/ CV is not given.


but in that case answer would be - 600000/ SPI(0.80) = 750000, and this option is not given.


Hence only option 2 = 600000/0.80*0.50 = 1500000, will be the right choice.( your option i -- this is only possible option here)


read p 185 1st para:


EAC forecast for ETC work considering both SPI and CPI factors. In this forecast, the ETC work will be performed at an efficiency rate that considers both the cost and schedule performance indices. It assumes both a negative cost performance to date, and a requirement to meet a firm schedule commitment by the project. This method is most useful when the project schedule is a factor impacting the ETC effort. Variations of this method weigh the CPI and SPI at different values (e.g., 80/20, 50/50, or some other ratio) according to the project manager's judgment. Equation: AC + [(BAC — EV) / (cumulative CPI x cumulative SPI)].

sspawar

Sun, 02/03/2013 - 03:02

 From where you got this question,  Only choice 2 is right answer.

raza82

Sun, 02/03/2013 - 05:23

Answer given is 1200000 

sunitaPMP

Sun, 02/03/2013 - 05:11

Hi raza82,

Can we have the correct answer with explanation given in simulator?

Thanks..

raza82

Sun, 02/03/2013 - 05:22

Answer is 1200000. I dont understand why they have used this formula for caclulating EAC, th9063 and sunita got it right according to simulator, can someone explain please.

 

The default value of EAC (assuming current variances are typical) is calculated as below:

EAC = AC + (BAC-EV)/CPI

EAC = $800,000 + ($ 1,000,000 - $ 400,000)/($ 400,000 / $ 800,000)

EAC = $ 800,000 + ($ 600,000/0.5)

EAC = $ 2,000,000 

So, ETC = EAC – AC = $ 2,000,000 - $ 800,000 = $ 1,200,000 
 
 
 

raza82

Sun, 02/03/2013 - 05:26

 I read somewhere that 

 

EAC = AC + (BAC-EV)/CPI   is same as EAC = BAC/CPI

 

sspawar

Sun, 02/03/2013 - 06:05

 Yes it is true, in case of typical case.

bks CPI = EV/AC is calculted on basis AC wrt its EV. and thus AC = EV/CPI

Now

EAC = AC + (BAC-EV)/CPI  

replace AC

EAC =  EV/CPI + (BAC-EV)/CPI  = BAC/CPI

but in case of

CPI and SPI combined this formula will not work , because  EV of CPI is different than EV of SPI.

in below example:

for CPI , AC = 800000 against  EV = 400000, and for SPI, (PV)  = 500000 against EV =400000

 

raza82

Sun, 02/03/2013 - 06:23

Incase of typical variance i dont think we need to use this formula, EAC = AC + (BAC-EV)/CPI

We can just go ahead and use EAC = BAC/CPI.

Am I right? 

sspawar

Sun, 02/03/2013 - 06:33

 Definitely

rjbuzzing

Sun, 02/17/2013 - 13:17

EAC  = BAC / CPI (No Variances and current CPI will continue in future)

EAC = ETC + AC

EAC = AC + (BAC - EV)

EAC = AC + (BAC - EV) / CPI * SPI

How can we apply first formulae here, since i do see variance in past, how can we gaurantee that there will be no more in future based on the text of the question ?

raza82

Sun, 02/17/2013 - 16:14

...from various books, fourms, notes.....that if nothing is given in the question, the most common formula for calculating EAC is EAC = BAC/CPI 

Having said that...in this question there is no indication that this is a typical case or things are gonna improve or in future work will be peformed at the budgeted rate, so we assume that the current cost performance will continue in the future, hence EAC = BAC/CPI

Vanessa362

Mon, 09/02/2013 - 10:36

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