Cost Control and Planning 2 Notes - Week 9 Earned Value

NEW SOUTH WALES TECHNICAL AND FURTHER EDUCATION COMMISSION ______________________________________ NIRIMBA COLLEGE OF TAFE

COST CONTROL AND PLANNING 2 2183L

WEEK 9 NOTES
Earned Value Management Examples

Content
Questions to be completed

Prepared by Trevor Mullins

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Cost Control and Planning 2 Notes - Week 9 Earned Value

Summary of EVM How much work should be done? How much work is done? How much did the is done work cost? What was the total job supposed to cost? What do we now expect the total job to cost? How much do we now expect to eventually under spend/overspend? Budgeted Cost for Work Scheduled Budgeted Cost for Work Performed Actual Cost of Work Performed Budget at Completion Estimate at Completion Variance at Completion BCWS BCWP ACWP BAC EAC or LRE = ACWP + ETC VAC = BAC EAC

Estimate at Completion (Best case): Estimate to Complete: Estimate at Completion (continue the way they are): Schedule Variance: Schedule Performance Indices: Cost Variance: Cost Performance Indices: Latest Revised Estimate: Budgeted Cost of Work Scheduled: Budgeted Cost of work performed: Actual Cost of Work Performed: Budget at Completion:

EAC = ACWP + ETC ETC = BAC BCWP EAC = BAC/CPI SV = BCWP BCWS SPI = BCWP/BCWS CV = BCWP ACWP CPI = BCWP/ACWP LRE = EAC BCWS BCWP ACWP BAC = Cumulative BCWS

Prepared by Trevor Mullins

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Cost Control and Planning 2 Notes - Week 9 Earned Value

Question 1: You have a total budget of $100,000 that is to be spent over 12 months in order to produce 20 units Status: 6 months time has elapsed and you have spent $64,000 to date. You have 8 complete and 2 units partially (50%) produced. How much work should be done?

How much work is done?

How much did the is done work cost? What was the total job supposed to cost?

What do we now expect the total job to cost?

How much do we now expect to eventually under spend/overspend?

Prepared by Trevor Mullins

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13/04/2013

Cost Control and Planning 2 Notes - Week 9 Earned Value

Question 1 Answer: You have a total budget of $100,000 that is to be spent over 12 months in order to produce 20 units Status: 6 months time has elapsed and you have spent $64,000 to date. You have 8 complete and 2 units partially (50%) produced. How much work should be done? BCWS = [$100000/12 months] x 6months elapsed = $50,000. How much work is done? BCWP = [8 units x ($100,000/20)] + [50% of 2 units x ($100,000/20)] = [8 x $5,000] + [0.5 x 2 x $5,000] = [$40,000] + [$5,000] = $45,000 How much did the is done work cost? ACWP = $64,000 (from given accounting data) What was the total job supposed to cost? BAC = $100,000 (given) What do we now expect the total job to cost? Latest Revised Estimate (LRE) = Estimate at Completion (EAC) Best Case EAC = ACWP + ETC Estimate to Complete from here (ETC) = BAC BCWP = $100,000 - $45,000 = $55,000 Best Case EAC = $64,000 + $55,000 = $119,000 If things continue as they are EAC = BAC/CPI BAC = $100,000 CPI = BCWP/ACWP = $45,000/$64,000 = 0.703125 = 0.71 EAC = BAC/CPI = $100,000 / 0.71 = $140,845.07 How much do we now expect to eventually under spend/overspend? Variance at Completion (VAC) = BAC EAC = $100,000 - $140,845.07 = -$40,845.07 (negative means overspend)

Prepared by Trevor Mullins

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Cost Control and Planning 2 Notes - Week 9 Earned Value

Question 2. You have a total budget of $1,800,000 that is to be spent over 12 months in order to produce 55 units Status: 8 months time has elapsed and you have spent $897,000 to date. You have 30 complete and 6 units partially (50%) produced. How much work should be done?

How much work is done?

How much did the is done work cost? What was the total job supposed to cost?

What do we now expect the total job to cost?

How much do we now expect to eventually under spend/overspend?

Prepared by Trevor Mullins

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Cost Control and Planning 2 Notes - Week 9 Earned Value

Question 2 Answer: You have a total budget of $1,800,000 that is to be spent over 12 months in order to produce 55 units Status: 8 months time has elapsed and you have spent $897,000 to date. You have 30 complete and 6 units partially (50%) produced. How much work should be done? BCWS = [$1,800,000/12 months] x 8 months elapsed = $1,200,000. How much work is done? BCWP = [30 units x ($1,800,000/55)] + [50% of 6 units x ($1,800,000/55)] = [30 x $32,727.28] + [0.5 x 6 x $32,727.28] = [$981,818.18] + [$98,181.82] = $1,080,000.00 How much did the is done work cost? ACWP = $897,000 (from given accounting data) What was the total job supposed to cost? BAC = $1,800,000 (given) What do we now expect the total job to cost? Latest Revised Estimate (LRE) = Estimate at Completion (EAC) Best Case EAC = ACWP + ETC Estimate to Complete from here (ETC) = BAC BCWP = $1,800,000 - $1,080,000 = $720,000 If we follow the plan from here on EAC = $897,000 + $720,000 = $1,617,000 If things continue as they are EAC = BAC/CPI BAC = $1,800,000 CPI = BCWP/ACWP = $1,080,000/$897,000 = 1.204 = 1.2 EAC = BAC/CPI = $1,800,000 / 1.2 = $1,500,000 How much do we now expect to eventually under spend/overspend? Variance at Completion (VAC) = BAC EAC = $1,800,000 - $1,617,000 = $183,000 (positive means under spend)

Prepared by Trevor Mullins

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Cost Control and Planning 2 Notes - Week 9 Earned Value

Question 3.

In regards to the S curve above: How much work should be done?

How much work is done? How much did the is done work cost? What was the total job supposed to cost?

What do we now expect the total job to cost?

How much do we now expect to eventually under spend/overspend?

Prepared by Trevor Mullins

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Cost Control and Planning 2 Notes - Week 9 Earned Value

Question 3 Answer: How much work should be done? BCWS = $380,000 (from graph) How much work is done? BCWP = $320,000 (from graph) How much did the is done work cost? ACWP = $480,000 (from graph) What was the total job supposed to cost? BAC = $820,000 (given) What do we now expect the total job to cost? Latest Revised Estimate (LRE) = Estimate at Completion (EAC) Best Case EAC = ACWP + ETC Estimate to Complete from here (ETC) = BAC BCWP = $820,000 - $320,000 = $500,000 If we follow the plan from here on EAC = $480,000 + $500,000 = $980,000 If things continue as they are EAC = BAC/CPI BAC = $820,000 CPI = BCWP/ACWP = $320,000/$480,000 = 0.6666667 = 0.67 EAC = BAC/CPI = $820,000 / 0.67 = $1,223,880.60 How much do we now expect to eventually under spend/overspend? Variance at Completion (VAC) = BAC EAC = $820,000 - $1,223,880.60 = -$403,880.60 (negative means over spend)

Prepared by Trevor Mullins

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