Help need on using the correct EAC Cost Formulas

Submitted by mickcalcara on Mon, 07/05/2010 - 00:46

Hi, I am having time understanding when we should use the appropriate EAC formula. I assume EAC = BAC / CPI and EAC = AC + ( BAC – EV ) might be the most common ( based on what I am seeing in the practice exams ). What types of clues in the exam questions help determine the formula to use? Thanks..

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The PMP Guru's picture

The PMP Guru

Mon, 07/05/2010 - 17:37

Hi mickcalcara,

Let me make it easy for you and all. In the exam it will be mentioned accordingly and you have to pick the clue and use the appropriate formula.


Estimate At Completion (EAC)

EAC=AC+(BAC-EV)

            (CPI*SPI)

 Used when both Cost & Schedule performance are considered.


Estimate At Completion (EAC)

EAC=AC+BAC-EV

If project is A-Typical, Whatever has happened, Project will be on Budget.


Estimate At Completion (EAC)

EAC=AC+ETC

In case of Re-baseling


Estimate At Completion (EAC)

EAC=BAC

          SPI

If Schedule Variance continues


Estimate At Completion (EAC)

EAC=BAC

          CPI

If Cost Variance continues

 

 

Regards,

The PMP Guru

http://thepmpguru.wordpress.com/

mickcalcara

Mon, 07/05/2010 - 18:47

Thanks..I am having trouble understanding how these can be phrased in a question.

mickcalcara

Tue, 07/06/2010 - 01:26

I just found some questions on pmstudy that represent required usage of the different types of EAC formulas. If the actual test questions are like these sample questions, I should be good. thanks..

The PMP Guru's picture

The PMP Guru

Tue, 07/06/2010 - 09:05

In the exam, The situation should be given. I hope the description I gave on the right will the formula's will be enough for you to understand and extract this from any question that is available on EAC.

If still not clear, you can write to me again and I will try to explain.

Thanks...

sam12

Tue, 07/06/2010 - 10:14

 


Hi,


The first formula dosen't look correct to me.









Estimate At Completion (EAC)
EAC=AC+(BAC-EV)

            (CPI*SPI)
 Used when both Cost & Schedule performance are considered.


It should have been
EAC = AC + [(BAC-EV)/(SPI*CPI)]


Neither have I heard about any EAC based on Schedule variance.
i.e. EAC = BAC/SPI


For cost variance, instead of CPI, it should have been mentioned as Cumulative CPI


Regards,
Sam
 


 

The PMP Guru's picture

The PMP Guru

Wed, 07/07/2010 - 08:49

@Sam,

I think you just sneak into the PMBOK and made the correction and I think you have no idea what an EAC is :)

My point in here was to clarify what formula should be used in which situation. Also I know the PMBOK refer it to Cumulative CPI but normally in the formula you don't have the computer graphics to put a (C) on top of the formula, So it's written with the C or Cummulative.

PMP101

Wed, 07/07/2010 - 14:09

 


Am aware of this formula EAC=AC+(BAC-EV)/CPI

pfehlauer

Sun, 09/05/2010 - 15:03

Dear Sam, you should remember basic mathematics... your correction is totally irrelevant, since both formulas are the same: EAC=AC+(BAC-EV) / (CPI*SPI) = EAC = AC + [(BAC-EV)/(SPI*CPI)]. Remember that multiplication and division operators have precedence over plus and minus. Do NOT blindly memorize formulas from the PMBOK, you should rather try to understand them.

tikiarya

Mon, 07/12/2010 - 12:17

In addition to formulae provided by PMGURU, Practice Standard for earned value management has provided one special case.

future cost performance will be influenced jointly in some proportion by both CPI and SPI say X and Y

EAC=AC+[(BAC-EV)/(X *CPI+Y*SPI)]

pfehlauer

Sun, 09/05/2010 - 15:19

At least you should remember the three scenarios the PMBOK lists:

1- Assume you will perform at budgeted rate (assume future will do well): EAC = AC + BAC - EV . Notice here that if the project is right on budget...the CPI = 1, means that AC = EV. Means that in the formula above it will be EAC = BAC (AC-EV=0). This should help to understand the logic behind the formula.

2- Assume you will perform as you've been doing so far, i.e. current CPI: EAC = BAC / CumCPI. Is like taking the formula in 1-, and applyig the adjustment for the WHOLE budget, from start to finish, since CPI is EV/AC. Again, if you are performing perfectly with CPI=1, or AC=EV, then EAC=BAC

3- Take both cost and schedule performance into the formula if you think that both schedule and costs will perform as up to date: take the formula in 1-, and adjust the "to go" it with the two performance indices: EAC = AC + (BAC-EV) / (CPIc + SPIc). If you are RIGHT on budget and RIGHT on time, both indices will be 1, so the formula will get a EAC = AC + (BAC - EV) / (1 * 1)...or EAC = AC + BAC - EV, and since CPI = 1, the formula gets EAC = BAC.

It always helps to understand that in a perfect project, the EAC = BAC. But in the real world, some devitaions occur...so you should adjust that formula with real costs factors...but I suggest to always start your lobic from the ideal world and then adjust it, i.e. start from EAC = BAC.

 

Hope this clarifies,

Pedro