***Math Ques on EAC -- Need Help ***

I want to know for the EAC ( Estimate At Completion) , which formala can be used at what time ? 

a) EAC = AC + ( BAC - EV )

b) EAC = BAC / CPI

Ideally , both the formula should give the same or appr same answer but that is not the case. 

Here is example :-

Question:  As a project manager, you are required to produce project performance reports on a regular basis, your project`s Budget at Completion is $750,000, planned value is $100,000, schedule variance is $30,000, and cost variance is $50,000. What is the percentage complete and estimate at completion in your project?

 
  1     18%, $ 500,000
 
  2     17.33%, $ 461,538
 
  3     17.8%, $ 437,500
 
  4     18%, $ 437,500
 
Correct Answer : 2 
 
Explanation :  
 
Correct Answer is coming from the formula EAC = BAC / CPI. When I am trying to use the formula EAC = AC + (BAC - EV) , the result is not same.
 
Please advise me .
 
Regards,
Sam

 

Sam, you cannot use both formula and expect to get same result, as these formulas, even if we are looking for the same EAC is influenced by certain condition. Thus, it depends on situation which formula you are going to use.

Follow this link here, and read the forum, you will be clarified.

http://pmzilla.com/4-types-eac-formulas-when-use-what

Thanks for the quick one.

Looks like in this question situation is not explained excepts numbers , so do we need to assume certain things in order to go with particular formula ? or there is any priority rule on the formula like which one to use first or  by default ?

 

Regards,

Sam

 

No sam, the question is clear. notice of the word "regular basis". If i will rewrite the question like this, "In a regular basis, what is the formula for calculating the EAC?" so what your answer would be? is it not the one where rate is the same? yes it is, and that is EAC =  BAC / CPI.

I hope this clarified your doubts sam.

you can follow me also in my other forum where i also post detailed explanation,, http://www.pmptrend.com/index.php/en/forum/11-Questions-Answers-Queries-Infos-Etc/25-Understanding-Situational-Questions#25

 I agree Sam. Question does not paint a clear picture. Creating report on regular basis does not mean that CPI is expected to remain same throughout the project. PM's are supposed to create reports on regular basis...Correct!!

I do not think you will get this kind of amiguous questions in real exam. They clearly paint a picture if the CPI is expected to remain same through the project (EAC=BAC/CPI) or there is one time hiccup (EAC=AC+BAC-EV) in project. In cases where you can not decide, use EAC=BAC/CPI; although rare situation for real exam. 

Please read my blog to understand more on this. 

 

The context of the question is about "performance" and that is on a regular basis. It is not about "submission" of report, or the "report" itself. Thus, when we say, the "performance" is regular, how would you guys interpret then?

In my articles sam, i am stressing on the importance of properly understanding questions based first on 1) context, 2) situation, 3) required.  Without understandiing and interpreting the question very well, people may think that the question is ambiguous but in fact not.  This is the criticality of PMP actual exam, unless the question is a straight forward such as - "all of the following are inputs of blah blah blah EXCEPT:"

 I do not know why you are trying to manipulate, It is very poor quality question. Before posting your comments at least review them.  There is no point of personal contention over here but for the sake of PMP aspirants, I want to re-affirm my thought that this question does not paint a situational picture well.

Let’s do dichotomy of question:

 "As a project manager, you are required to produce project performance reports on a regular basis"

> This is very generic comment. Well, as a project manager you have to produce performance reports on a regular basis for any project. This means management would need a report on project on a certain interval. This is very common case and project managers are supposed to produce performance reports regularly. Generating performance reports on a regular basis does not mean your project performance is persistent, non-varying, typical or expected to be remaining same or fluctuate. 

"your project`s Budget at Completion is $750,000, planned value is $100,000, schedule variance is $30,000, and cost variance is $50,000. What is the percentage complete and estimate at completion in your project?"

>Again in the part of question above you have bunch of data presented but it does not tell you how project situation/context/setting is? 

Now let’s check  projmanpro's comment above:

"The context of the question is about "performance" and that is on a regular basis. It is not about "submission" of report, or the "report" itself. Thus, when we say, the "performance" is regular, how would you guys interpret then?"

>The dictionary definition of word context is "The circumstances in which an event occurs; or a setting". I I do not see this question provides any circumstances or settings unique to project for which we will be calculating EAC here although question provided a generic action i.e. generating performance report on a regular basis (which can be executed in any context).

 

Very simple to understand.. If i will rewrite the question like this "On a regular basis, what is the formula to use to calculate EAC?"

So what is then your answer dudes?

Does not my rewritten question not the same in context as the question? Anyways, i respect everyone's understanding and opinion, and for sure everyone can also relate to each opintion. The good thing is, everyone is for sure learning from this discussion.

 

 I again humbly disagree.  

<projmanpro>" On a regular basis, what is the formula to use to calculate EAC?"

 <Original question>As a project manager, you are required to produce project performance reports on a regular basis, 

your project`s Budget at Completion is $750,000, planned value is $100,000, schedule variance is $30,000, and cost variance is $50,000. What is the percentage complete and estimate at completion in your project?

I do not know how you can twist the language and rewrite question’s first line like this. (After first line we only have data to calculate)

In addition to above, you are missing (or overlooking) one point that regular reporting does not imply that project is executing with regular velocity (Generating performance reports on a regular basis does not mean your project performance (i.e. velocity) is persistent, non-varying, typical or expected to be remaining same or fluctuate.)

EAC is dependent on project’s current health and project manager's foresight  (remember EAC is cost forecasting technique) which decides

Ø 

Project will remain executing with current velocity or

Ø 

Project had one time hiccup but will now gain the velocity as it had in the past

Ø 

Project will remain executing with current velocity although I must finish work with original timeline

(so for any EAC calculation you need to two things 1. current project data (BAC, PV, CV,SV etc.) and 2. how  will be expected project velocity as per the criterian listed above)


Do you see how the original question can imply that you are mentioning?

 

 


-------------------------------------------------------------------------------------------------------------------

<projmanpro> Anyways, i respect everyone's understanding and opinion, and for sure everyone can also relate to each opinion. The good thing is, everyone is for sure learning from this discussion.

I have no intention to disrespect you or any one. I am just putting my humble opinion/thoughts/supportive arguments here and I apologize if I hurt you anyway. I believe constructive conflict is always good; as you mentioned everyone is learning from this thoughtful discussion too.

 

 

 

  

lol

As what i am emphasizing, the context is about "performance" and i stress that performance differs from "progress". Look, a project could be in a good progress, but could be out of budget. hence, if you are a PM, and you are told to do a project performance report, you have to show and substantiate performance calculations. And what should be the formula you have to use? then within the limits of the given in the question plus the required hinted by the phrase "on the regular basis" i emphasize "REGULAR BASIS" it is basis my friend, and NOT "regular period" or "regular frequency" because in your explanation, you are directly refering to "frequency" or "period" as the meaning of that phrase BUT no, it is very clear, "regular basis" - meaning from which you will base your performance report.

I am not the author of that question ha ha! why not ask the original poster from whom he got that question and ask the author then? :-)  but whoever is the author, i agree with his answer and his explanation. How about you? do you agree with his answer? Do you agree with his explanation? I think you agree with his answer, and you partly agree also with his explanation.

The risk is, if you guys would always think pmp exam tricky questions to be wrong, then you will never pass the PMP actual exam.
 

 <projmanpro>As what i am emphasizing, the context is about "performance" and i stress that performance differs from "progress".

 

Agree that performance and progress are different. 

 

(I consider performance as value delivered on a timeline and progress is work delivered on timeline)

 

 <projmanpro> Look, a project could be in a good progress, but could be out of budget.

Agree.

(In PMI terminology you are saying CPI is <1 and SPI is > or =1)

 

<projmanpro>hence, if you are a PM, and you are told to do a project performance report, you have to show and substantiate performance calculations.

I guess the statement above agrees with my logic, you have to substantiate (the performance &) forecasting calculations and for that you need to know how project is doing and how you think it will be doing in future with all information in your hand. I am continuously saying same thing, this question does not provide anything which gives you enough information to substantiate result coming from any of EAC calculation. [Apart from this, EAC is not a performance measure, it is forecasting on the basis of current performance and expected future performance. For performance at any t=t, we use CPI, SPI or variances]

 

<projmanpro>And what should be the formula you have to use? then within the limits of the given in the question plus the required hinted by the phrase "on the regular basis" i emphasize "REGULAR BASIS" it is basis my friend, and NOT "regular period" or "regular frequency" because in your explanation, you are directly refering to "frequency" or "period" as the meaning of that phrase BUT no, it is very clear, "regular basis" - meaning from which you will base your performance report.

It was my initial stand that this question does not provide sufficient information to calculate correct EAC. Performance can be checked from baseline but forecasting needs more and that is project manager’s view on project’s current and future expected velocity. (for example flood in Thailand hit many system engineering projects in the month of Feb/2012; if I have to calculate EAC, I will use EAC=AC+BAC-EV not the BAC/CPI, considering very low probability of occurring this event again on the basis of past metrological data.)
Rest of highlighted paragraph does not make any sense to me. I do not know where PMBOK defines regular basis {regular basis" - meaning from which you will base your performance report.} I reaffirm my understanding of this sentence that it means program manager is required to create performance report on a regular interval.  

<projmanpro>I am not the author of that question ha ha! why not ask the original poster from whom he got that question and ask the author then? :-)  but whoever is the author, i agree with his answer and his explanation. How about you? do you agree with his answer? Do you agree with his explanation? I think you agree with his answer, and you partly agree also with his explanation.

As stated earlier, my whole point to chime in the discussion was to make aware PMP aspirants that there are many low grade questions floating around which do not help much rather confuse a lot. I did not experience any such incomplete question in PMP exam experience or got feedback from any of my colleagues completed PMP recently who I coach on regular basis.

 

<projmanpro>The risk is, if you guys would always think pmp exam tricky questions to be wrong, then you will never pass the PMP actual exam.
I strongly believe that if we cover complete syllabus and concepts are clear, there is no trick that can trick you in any exam.

What do you think are the figure given? are they not based on baselines? :-)

The matter of the issue is - "understanding of the question." and this is undebatable. haha! You have the right to your own understanding and i have to mine as well.If your understanding of "regular basis" is regular interval then fine. It is your own statement that a PM has to prepare reports on a regular interval, then so why should the question ask him then if that is implied?hehe!

The issue and doubt of the original poster from the start was so clear. He was wondering why the formula used was the one presented in the questions's answer, and why not the other one? So that's why i explained based on my understnding of the question, which may be similar to the author's point. (i dont know the author, and am not the author of that question).

That for me, the context of the question is to prepare a PERFORMANCE REPORT (NOT A PROGRESS REPORT) based on regular condition (AND NOT ON REGULAR INTERVAL E.G. WEEKLY, MONTHLY, ETC) and this hints to use the simple formula for calculating EAC. So what is wrong in my opinion?

And why are u trying to find the meaning of "regular basis" in PMBOK by the way? you cannot find it there dude, but in your common sense, you can find it. :-)  peace! cheeerss!

 

 I tried to explain the cost forcasting formulae one should use in different situtaions. Please check my blog.

 Dear SAM,

Hope your answer is here, now your answer will be same by both formulae:

 <br />
\begin{align}<br />
EAC = AC + {(BAC-EV)\over CPI} = {BAC \over CPI}<br />
\end{align}<br />

when cpi is one then formula will be  EAC= AC + BAC-EV,

so remember above a mother formula.

by this you can understand

when cpi is one

EAC = BAC , because EV = AC also.

 

 

 

Hi All,

Thanks to everyone for the clarification and details.

I learnt many things about the formulas and I am sure that will surely be helpful for the exam.

Apprecuiate it !!

Regards, Sam

 

This is what I have been searching in many websites and I finally found it here. Amazing article. I am so impressed. Keep it up.

writing a personal mission statement

Hey, Correct answer is :2 and this is possible by using  the formula EAC = AC + (BAC - EV). Let me know your pm, I will tell you. math problems

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