ETC Calculation Question

 

What is the correct answer?

 

A project was estimated to cost $ 200,000 with a timeline of 10 months. Due to a shipment delay, the schedule was slightly delayed. This was however made up by receiving the first batch of materials for the project by air. The net result was that there was some additional cost in the project. At the end of the second month, the project manager reviews the project and finds that the project is 20% complete and Actual Costs are $ 50,000. The Estimate to complete (ETC) for the project would now be:

A.$160,000

B.$210,000

C.$250,000

D.$200,000

 

Thanks

Jai

BAC = 200

End of second month: PV = 200/10 x 2 = 40

EV = 40

AC = 50

Issue has been resolved so the remaining would go at the budgeted rate.

ETC = BAC - EV = 200 - 40 = 160

Answer: A

 

crushPMP's picture

ETC = BAC - EV

BAC =200 (given)

EV = 1/5 * 200 = 40

ETC = 160  (A)

Thanks CrushPMP and AD

I was able to solve this problem and figured out the correct choice. When I was comparing my solution with author's, it was different so that I poseted this question. The author had solved the problem the same way you did.

I solved the ETC using ETC=EAC - AC formula and used EAC= AC+(BAC-EV) formula.

EAC = 500+(200-40)

        = 660

Now,

ETC = EAC-AC

        =660-500 =160.

I was bit confused if is there a fomula like ETC = BAC-AC. I do not see it in PMBOK to my knowledge.

Can you please explain me why and how did you choose the formula ETC=BAC-AC?

Thanks

Jai

 

       

crushPMP's picture

 There is no such formula (ETC =  BAC - AC). The correct formula is ETC = BAC - EV which is what AD and I have used.

You could ofcourse go the long way and derive the equation yourself from the 2 bolded equations from your earlier post.

ETC=EAC - AC ---------------- 1

EAC= AC+(BAC-EV) ----------- 2

 

Therefore, substituting eq 2 in eq 1, we get

ETC = AC + (BAC - EV) - AC

ETC = BAC - EV 

Nice explainations, CrushPMP. Thanks

Question to all:

Why don't we use the formula EAC = AC + (BAC – EV) / (CPI * SPI)

All above variables can be calculated from the provided data. The 10-month completion date seems to be a requirement.. all the more reason to use SPI in the calculation.

This gives  ETC = EAC - AC = 250,000, which is one of the choices.

Can somebody please explain?

 

Thanks.

 

crushPMP's picture

 You will use that formula only when it's a typically delayed condition. Here it was a one time schedule delay which was covered up by overnight delivery (which increased cost), so the 2 balanced each other out. Going forward the BAC is going to be maintained. So this was a case of atypical condition.

Though it is atypical case, but I agree with PMPNEWSTER as in denominator - SPI XCPI should be used because it is to be completed within a timelimit too.

this qsn earlier has been asked by somebody.

Generally we follow blindly the provider's answer.

In my opinion, we should ever stick with pmbok .

 Dear Pawar,

I am joining with crushPMP.

Here in this question timeline is given is to calculate the EV. 

All the projects have timelimit. otherwise it will not be project.

Question is saying nothing  very serious about  a " firm schedule" to be met.