If you’re preparing for the PMP® exam, it’s a good idea to get familiar with the frequently used formulas in Project Management. The exam is largely focused on the top formulas, which cases you should be using them in, how to apply them, how to compute them and how to derive values from them. A lot of people who take the exam feel that learning all of the PMP® formulas is the hardest part so it’s crucial to have a good grasp on them before you go into the exam. Here are some of the cost management formulas that you’ll need to know and some info on how and when to use them.
Earned Value Formulas
The following are Earned Value formulas, which mean you have to figure out the values of cost variance, schedule variance, cost performance index and schedule performance index.
- Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC)
- Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)
- Cost Performance Index (CPI) = EV / AC
- Schedule Performance Index (SPI) = EV / PV
Earned Value is the most important value, and it’s critical to think about the different factors affecting it. If you’re looking at cost-related questions, think about cost variance. If you’re working on a schedule, think about planned value. If you’re approaching variance, you have to subtract the actual cost and planned value from earned value. In each of these cases, Earned Value plays a big role.
EAC = AC + Bottom-up ETC
In order to obtain the future value, you need to process the project and focus on the actual costs incurred. This formula can help you come up with an estimate for what the completed project will cost. It’s used when the original estimate isn’t accurate – you can use it to calculate actual cost plus a new estimate for the work that remains.
EAC = BAC / Cumulative CPI
During the exam, if you are acting as a good project manager and working on the project as planned, you would be maintaining positive values in both CPI and SPI. That’s where this formula comes in. It is used when the original estimation is met without any deviation.
EAC = AC + (BAC – EV)
If the project isn’t turning out as planned and you have incurred more money than expected, this formula can help you calculate the new estimate at completion value. You will use your actual costs first and then adjust based on changes.
EAC = AC + [BAC – EV / (Cumulative CPI ´ Cumulative SPI)]
This formula works to calculate actual costs to date plus the remaining budget that has adapted to performance as the current ratio is as planned. For a project manager to meet the decided schedule, you calculate the EAC accordingly in order to stay on deadline.
There are over 25 formulas that might come up during the exam, but these are the ones that are most important and likely to appear multiple times in the course of the test. Knowing these formulas and making sure that you get some practice using them is an important step in getting ready for the test. Spend some time learning these formulas and when and how to use them – it will be of great help to you in your preparation for the exam.