PMP EVM Questions (20+ Practice Questions Included) EVM Graph Questions The EVM graph questions are one of the easiest questions to answer as you will only need to understand the meaning of the relative positions of the AC, PV and EV: AC vs PV: whether the project is under or over budget (AC > PV = over budget; AC < PV = under budget) EV vs PV: whether the project is ahead of or behind schedule (EV > PV = ahead of schedule; EV < PV = behind schedule) 1. With reference to the diagram below, it can be inferred that the project is currently: 1. ahead of schedule and under budget 2. ahead of schedule and over budget 3. behind schedule and under budget 4. behind schedule and over budget Solution: D As of today, AC > PV = over budget and EV < PV = behind schedule, so the project is both “behind schedule and over budget”. 2. With reference to the diagram below, it can be inferred that the project is currently: 1 1. ahead of schedule and under budget 2. ahead of schedule and over budget 3. behind schedule and under budget 4. behind schedule and over budget Solution: C As of today, AC < PV = under budget and EV < PV = behind schedule, so the project is “behind schedule and under budget”. 3. With reference to the diagram below, it can be inferred that the project is currently: 1. ahead of schedule and under budget 2. ahead of schedule and over budget 3. behind schedule and under budget 4. behind schedule and over budget Solution: B As of today, AC > PV = over budget and EV > PV = ahead of schedule, so the project is “ahead of schedule and over budget”. Definition of EVM Metrics These types of questions will test you on your understanding of the meaning of various EVM metrics: Planned Value (PV) — how much work was scheduled to date Earned Value (EV) — how much work was completed to date Actual Cost (AC) — the amount of money spent so far Budget at Completion (BAC) — the total budget for the project Estimate at Completion (EAC) — the estimated total amount of money needed to be put into the project based on the information available as today 2 Estimate to Completion (ETC) — how much more do we need to put into the project to complete it Variance at Completion (VAC) — the difference between the estimated total cost and the original budget Cost Performance Index (CPI) — ratio between EV and AC, to reflect whether the project work is under / on / over budget in relative terms Schedule Performance Index (SPI) — ratio between EV and PV, to reflect whether the project work is ahead of / on / behind schedule in relative terms To Complete Performance Index (TCPI) — the efficiency needed to finish the project on budget, it is the ratio between budgeted cost of work remaining and money remaining 1. If a project has a Schedule Performance Index (SPI) of 0.90, this means that: 1. 90% of the work planned to date has been completed 2. 90% of the work of the whole project has been completed 3. 90% of the budget planned to date has been spent 4. 90% of the project budget has been spent Solution: A The Schedule Performance Index (SPI) represents the performance of the project in terms of schedule up to the moment. If it is smaller than 1, less than 100% of the scheduled work has been completed to date. 2. If a project has a Cost Performance Index (CPI) of 0.90, this means that: 1. 90% of the work planned to date has been completed 2. 90% of the budget planned to date has been spent 3. 111% of the budget planned to date has been spent 4. 111% of the project budget has been spent Solution: C The Cost Performance Index (CPI) represents the performance of the project in terms of budget up to the moment. If it is smaller than 1, the project is currently over budget (i.e. has spent more than what has been planned). 3. If a project has a To Complete Performance Index (TCPI) of 0.90, this means that: 1. 90% of the work planned up to today has been completed 2. 90% of the budget planned up to today has been spent 3. the project can spend money at a rate 11% higher than planned and still meet the project budget 4. the project can spend money at a rate 10% lower than planned to meet the project budget Solution: C The To Complete Performance Index (TCPI) is the efficiency needed to finish the project on budget. If it is smaller than 1, that means that we have more money left on the budget 3 than the remaining Planned Value (PV) to achieve. Therefore, in theory, we can spend more money yet can still finish the project on budget. (However, in reality, it is generally preferred to finish the project under budget. A TCPI smaller than 1 is a good sign that the project is going healthy.) 4. A project with both Schedule Performance Index (SPI) and Cost Performance Index (CPI) of 0.80. The project is currently: 1. ahead of schedule and under budget 2. behind schedule and under budget 3. ahead of schedule and over budget 4. behind schedule and over budget Solution: D CPI < 1 = over budget and SPI < 1 = behind schedule, so the project is both “behind schedule and over budget”. 5. According to EVM, which term below represents the outstanding amount of money required to finish the project? 1. Planned Value (PV) 2. Earned Value (EV) 3. Estimate to Complete (ETC) 4. Estimate at Completion (EAC) Solution: C By definition, Estimate to Completion (ETC) is the amount of money we need to put into the project from today in order to complete it. 6. According to EVM, which term below represents the budgeted cost of the work to be completed to date? 1. Planned Value (PV) 2. Earned Value (EV) 3. Estimate to Complete (ETC) 4. Estimate at Completion (EAC) Solution: A By definition, Planned Value (PV) is how much value of work was scheduled to achieve to date. Simple EVM Calculation Questions For these types of questions, you will simply need to recall the correct EVM calculation formulas and correctly substitute the values into the formulas to arrive at the correct answer. Please do make use of the on-screen calculator / physical calculator provided to do the calculation even if you are a Maths wizard. It is a pity to lose marks for careless calculation even if you have selected the correct formula. 4 Also, most of such simple EVM calculation questions will supply more than enough information for you to use as a kind of distractor, it is a test of whether you can select the correct formulas as well as the correct values to substitute into the formulas. SV = EV – PV CV = EV – AC SPI = EV/PV CPI = EV/AC VAC = BAC – EAC 1. A project with Earned Value (EV) = $1000, Actual Cost (AC) = $800 and Planned Value (PV) = $800. What is the Schedule Variance (SV)? 1. $200 2. $0 3. -$100 4. -$200 Solution: A SV = EV – PV SV = $1000 – $800 = $200 Note that the Actual Cost (AC) is not used in the calculation. 2. A project with Earned Value (EV) = $1000, Actual Cost (AC) = $800 and Planned Value (PV) = $800. What is the Cost Variance (CV)? 1. $200 2. $0 3. -$100 4. -$200 Solution: A CV = EV – AC CV = $1000 – $800 = $200 Note that the Planned Value (PV) is not used in the calculation. 3. A project with Earned Value (EV) = $250, Actual Cost (AC) = $200 and Planned Value (PV) = $350. What is the Schedule Performance Index (SPI)? 1. 1.25 2. 0.80 3. 0.71 4. 1.40 Solution: C The formula to be used to calculate SPI is: 5 SPI = EV / PV SPI = $250 / $350 = 0.71 4. A project with Earned Value (EV) = $250, Actual Cost (AC) = $200 and Planned Value (PV) = $350. What is the Cost Performance Index (CPI)? 1. 1.25 2. 0.80 3. 0.71 4. 1.40 Solution: A The formula to be used to calculate CPI is: CPI = EV / AC CPI = $250 / $200 = 1.25 EVM Estimate At Completion (EAC) Questions Since there are multiple Estimate at Completion (EAC) formulas, PMP Aspirants should be able to get clues from the questions on which EAC formula to use: EAC = BAC/CPI If we believe the project will continue to spend at the same rate up to now (e.g. the delay is caused by reasons which is likely to continue) EAC = AC + (BAC-EV) If we believe that future expenditures will occur at the original forecasted amount (no more delays of the same kind in future) EAC = AC + [(BAC-EV)/(SPI*CPI)] If we believe that both current cost and current schedule performance will impact future cost performance EAC = AC + New Estimate If we believe the original conditions and assumptions are wrong 1. For the project with original project budget $1000 and both the Cost Performance Index (CPI) and Schedule Performance Index (SPI) equal 1. Assuming the project will continue to spend money at the same rate, what is the Estimate At Completion (EAC) of the project? 1. $833 2. $933 3. $1,000 4. $1,033 Solution: C As the project will continue to spend at the same current rate, the formula to be used would be: EAC = BAC/CPI EAC = $1000 / 1 = $1000 6 2. For the project with Earned Value (EV) = $360, Actual Cost (AC) = $400 and both Cost Performance Index (CPI) and Schedule Performance Index (SPI) equal 0.90. The original project budget is $1,000. Assuming the remaining work will be impacted by the current cost performance and current schedule performance, what is the Estimate At Completion (EAC) of the project? 1. $1,090 2. $1,190 3. $1,290 4. $1,390 Solution: B As the project will be impacted by the current cost performance and current schedule performance, the formula would be: EAC = AC + [(BAC-EV)/(SPI*CPI)] EAC = $400 + [($1000 – $360) / (0.9 * 0.9)] = $1190 3. For a project with Estimate at Completion (EAC) = $120,000 and Cost Performance Index (CPI) is 0.90. What is the Budget at Completion (BAC)? 1. $108,000 2. $118,000 3. $158,000 4. $208,000 Solution: A As no information is given on the future performance of the project, we could safely assume that the project will spend at the same rate. So we will make use of the formula: EAC = BAC / CPI $120,000 = BAC / 0.90 BAC = $120,000 * 0.90 = $108,000 Wordy Calculation Questions Usually these questions will describe you as the project manager of a project which is X months into the schedule and X% of work has been completed so far along with lots of other information. The questions will span several lines. Then it will ask you to calculate some EVM metrics based on the information provided. Also, the questions will usually not make use of EVM terms (like Planned Value, Actual Cost, Earned Value, etc.) but you can easily infer those values from the descriptions provided. The key to answering wordy questions correctly is to read the questions carefully and extract useful information from the questions and write down PV, EV, AC, etc. while you are reading the questions. 7 1. You are the project manager of a housing project in which a total of 10 houses are to be build over 10 months (1 house per month). The total budget for the housing project is $1,000,000. The project is now at the end of the 6th month with 5 houses built and $500,000 spent. The project is behind schedule owing to a work strike for a month. The Cost Performance Index (CPI) for the project is: 1. 1.0 2. 0.9 3. 1.1 4. 1.2 Solution: A The formula to be used to calculate CPI is: CPI = EV / AC CPI = $500,000 / $500,000 = 1.0 2. You are the project manager of a road paving project. A total of 10km of road is to be paved over a 5-month period. The total budget for the project is $10,000. The project is now at the end of the 3rd month with 8km of road paved and $8,000 spent. The Schedule Performance Index (SPI) for the project is: 1. 0.78 2. 0.98 3. 1.20 4. 1.33 Solution: D Since the road is assumed to be paved linearly, i.e. 2km of road per month. At the end of 3rd month, the PV should be $6,000 (for 6km of road). The formula to be used to calculate SPI is: SPI = EV / PV CPI = $8,000 / $6,000 = 1.33 Complicated EVM Calculation Questions These types of questions will required PMP Aspirants to make use of more than 1 PMP EVM formulas. These questions are considered the most difficult of all PMP EVM questions. Most PMP Aspirants not coming from a Science / Maths background would not even know which EVM formulas to pick, let alone arriving at the correct answer. But the good news is that these questions would seldom appear on the PMP Exam (for your reference: I got none in my PMP Exam). 1. For a project with Earned Value (EV) = $300, Actual Cost (AC) = $350 and Planned Value (PV) = $400. The overall project budget is $1,000. Assume that you will continue to spend at the same rate as you are currently spending. What is the Variance At Completion (VAC)? 8 1. -$150 2. $150 3. -$167 4. $167 Solution: C As the project will continue to spend at the same current rate, the formula to be used would be: VAC = BAC – EAC EAC = BAC/CPI CPI = EV/AC VAC = BAC – BAC/(EV/AC) =$1000 – $1000/($300/$350) = -$167 2. For the project with Earned Value (EV) = $300, Actual Cost (AC) = $250 and Planned Value (PV) = $300. The original project budget is $1000. Assuming the project will continue to spend money at the same rate, what is the Estimate At Completion (EAC) of the project? 1. $833 2. $933 3. $1,000 4. $1,033 Solution: A As the project will continue to spend at the same current rate, the formula to be used would be: EAC = BAC/CPI CPI = EV/AC EAC = BAC/(EV/AC) = $1000 / ($300/$250) = $833 3. For the project with Earned Value (EV) = $350, Actual Cost (AC) = $300 and Planned Value (PV) = $400. The original project budget is $1,000. Assuming the remaining work will be impacted by the current cost performance and current schedule performance, what is the Estimate At Completion (EAC) of the project? 1. $837 2. $937 3. $987 4. $1,280 Solution: B As the project will be impacted by the current cost performance and current schedule performance, the formula would be: EAC = AC + [(BAC-EV)/(SPI*CPI)] SPI = EV / PV = $350 / $400 = 0.875 9 CPI = EV / AC = $350 / $300 = 1.167 EAC = BAC/(EV/AC) = $300 + [($1000 – $350) / (0.875 * 1.167)] = $937 Further Reading PM Exam Formulas Study Guide — created by Cornelius Fitchner (the same author of the acclaimed online PMP Exam Prep course which I used to clear my PMP exam – the PM PrepCast™™). Source: http://edward-designer.com/web/pmp-evm-sample-questions/ PMP Earned Value Management (EVM) Calculation Explained in Simple Terms A simplified discussion of the EVM calculation just enough for the PMP Exam by Edward Chung · December 3, 2015 Summary: Among all the PMP® Exam formulas calculation questions, the Earned Value Management (EVM) questions are usually considered the most important ones as candidates will need to solve quite a few of them in the real PMP Exam — I got around 5+ EVM questions on my PMP Exam paper and I am quite confident that I could get them all correct. Introduction The PMP Exam tests your understanding of project management as a whole. To arrive at the correct answers for EVM questions, all you need to do in the PMP Exam is to: 1. Read the question carefully 2. Select the correct formula to apply 3. Calculate the answer (this is often the easiest part! You can get most answers without the use of calculators) PMP EVM Concepts Explained With Examples Earned value management (EVM) is used to assess the schedule and cost performance of a project — with EVM, the project manager will know exactly whether the project is: ahead of / on / behind schedule under / on / over budget Earned value management (EVM) bases on the concept that i) work completed will deliver value and ii) the value delivered equals the budget put into the work. The value gained can be assessed along the progression of the project. In reality, earned value management is very complicated as value usually cannot simply be assessed based on the percentage of completion. Good news here: PMI® has simplified PMP EVM calculation to very “ideal” situations! You will just need to know the following to get your PMP EVM questions correct. 10 Basic EVM Formulas To speak more clearly how the value is to be managed, a number of terms are defined in EVM (explained with the example of building 10 houses each has a value of US$1000 expected to be completed in 10 weeks in proportion): Planned Value (PV) — The budgeted value of the work completed so far at a specific date example: at end of week 4, altogether 4 houses should be completed, the PV is US$4000 Earned Value (EV) — The actual value of the work completed so far at a specific date (refer to the “Notes on Earned Value Measurement” section below) example: by end of week 4, only 3 houses are completed, the EV is US$3000 Actual Cost (AC) — The total expenditure for the work so far at a specific date example: by end of week 4, US$4000 was spend, the AC is US$4000 EVM is based on monitoring these three aspects along the project in order to reveal the health of the project with the following indices: Schedule Variance (SV) — difference between PV and EV, to tell whether the project work is ahead of / on / behind schedule o SV = EV – PV If the project is behind schedule the SV will be negative (i.e. achieved less than what planned) If the project is on schedule the SV = 0 If the project is ahead of schedule the SV will be positive (i.e. achieved more than what planned) o example: by end of week 4, the SV = EV – PV = US$3000 – US$4000 = -US$1000 (behind schedule) Schedule Performance Index (SPI) — ratio between EV and PV, to reflect whether the project work is ahead of / on / behind schedule in relative terms o SPI = EV/PV If the project is behind schedule the SPI < 1 (i.e. achieved less than what planned) If the project is on schedule the SPI = 1 If the project is ahead of schedule the SPI > 1 (i.e. achieved more than what planned) o example: by end of week 4, the SPI = EV/PV = US$3000/US$4000 = 0.75 (behind schedule) Cost Variance (CV) — difference between PV and AC, to tell whether the project work is under / on / over budget o CV = EV – AC If the project is over budget the CV will be negative (i.e. achieved less than spent) If the project is on budget the CV = 0 If the project is under budget the CV will be positive (i.e. achieved more than spent) o example: by end of week 4, the CV = EV – AC = US$3000 – US$4000 = -US$1000 (over budget) Cost Performance Index (CPI) — ratio between EV and AC, to reflect whether the project work is under / on / over budget in relative terms 11 o CPI = EV/AC If the project is over budget the CPI < 1 (i.e. achieved less than spent) If the project is on budget the CPI = 1 If the project is under budget the CPI > 1 (i.e. achieved more than spent) o example: by end of week 4, the CPI = EV/AC = US$3000/US$4000 = 0.75 (over budget) Note both SV and SPI / CV and CPI give similar information on schedule / budget but the indices will give more insights into the actual performance with a meaning comparison. From my experience, the most difficult process of solving EVM problems for PMP Exams is to identify the PV, EV and AC from the wordy calculation questions. Then you will just have to recall the correct formula to substitute the values into to get the answer — the question will usually ask you directly about the actual indices to get. Advanced EVM Formulas Budget at Completion (BAC) — also known as the project/work budget, that is the total amount of money originally planned to spend on the project/work o example: the BAC for the housing project = US$1000 x 10 = US$10000 Estimate at completion (EAC) — as the project goes on, there may be variations into the actual final cost from the planned final cost, EAC is a way to project/estimate the planned cost at project finish based on the currently available data o The following formulas can be used to calculate EAC based on which information and conditions given in the question: EAC = BAC/CPI If we believe the project will continue to spend at the same rate up to now The delay is caused by reasons which is likely to continue (e.g. labour with less skilled than expected) example: the EAC for the housing project = US$10000 / 0.75 = US$13333 EAC = AC + (BAC-EV) If we believe that future expenditures will occur at the original forecasted amount (no more delays of the same kind in future) The delay might be caused by some unforeseen reasons (e.g. typhoon) which is not likely to happen again example: the EAC for the housing project = US$4000 + (US$10000 – $3000) = US$11000 EAC = AC + [(BAC-EV)/(SPI*CPI)] If we believe that both current cost and current schedule performance will impact future cost performance The performance of the project will continue with sub-prime standards (over budget and behind schedule) This formula is less likely to be used for the PMP Exam 12 EAC = AC + New Estimate If we believe the original conditions and assumptions are wrong example: the EAC for the housing project = US$4000 + [(US$10000 – $3000)/(0.75*0.75)] = US$16444 Will not be tested as there is nothing to calculate Variance at Completion (VAC) — the variance at completion, i.e. the difference between the new estimate at completion and original planned value o VAC = BAC – EAC If we forecast the project will be over budget, VAC will be negative If we forecast the project will be under budget, VAC will be positive o example: the VAC for the housing project = US$10000 – US$13333 (just take the 1st EAC as an example only) = -US$3333 To Complete Performance Index (TCPI) — the efficiency needed to finish the project on budget, it is the ratio between budgeted cost of work remaining and money remaining o TCPI = (BAC-EV)/(BAC-AC) Use this equation if the project is required to finish within BAC o example: the TCPI for the housing project at end of week 4 = (US$10000 – US$3000) / (US$10000 – US$4000) = 1.67 TCPI = (BAC-EV)/(EAC-AC) Use this equation if the project is required to finish within new EAC example: the TCPI for the housing project at end of week 4 with new EAC US$13333 = (US$10000 – US$3000) / (US$13333 – US$4000) = 0.75 Notes on Earned Value Measurement The following will discuss how earned value is measured for project and work, from simple physical measurements, percentage complete to weighted milestones. Since the PMP EVM questions cannot describe a lot of information, the part on earned value measurements will normally be based on simplified situations like physical measurements or percentage complete. It is likely that you will not be tested on the more difficult ways of measuring earned values. These are included here for your reference only. Physical Measurement — directly transform the physical measurement of the amount of work completed into EV o example: building 10 houses each has a value of US$1000 expected to be completed in 10 weeks in proportion, earned value of 3 house built is US$3000 Percentage Complete — directly transform the percentage of the amount of work completed into EV o example: building 10 houses each has a value of US$1000 expected to be completed in 10 weeks in proportion, earned value of 30% complete is US$3000 Weighted Milestone — a EV is assigned to the 100% completion of each milestone of the work packages with prior agreement with stakeholders 13 Fixed Formula — a specific percentage of the overall PV is assigned to the start of a work package and the remaining assigned upon completion; these must be agreed upon in the project management plan o 0/100 rule: 0% EV at the activity begins; 100% EV upon completion o 20/80 rule: 20% EV at the activity begins; 80% EV upon completion. o 50/50 rule: 50% EV at the activity begins; 50% EV upon completion EVM Charts In common practices, EVM will also involve plotting the values on a graph in order to help stakeholders concerned to visualize the progress and the health of the project. More often than not you will find the EV, AC and PV plotted on a graph and you will be asked on the interpretation of the graph. Insights to be gained from the chart: If EV line is below PV, the project is behind schedule; if EV is above PV, the project is ahead of schedule. If AC line is below PV, the project is within budget; if AC is above PV, the project is over budget. Below is an example of the EVM charts you would be likely to encounter in your PMP Exam — solid lines represent actual figures while dotted lines represent forecasted figures: Judging from the chart above, we can infer that the project is currently over budget and behind schedule. PMP Earned Value Management (EVM) Formulas in PMBOK® Guide At a Glance 14 12 PMP EVM Formulas Name (Abbreviation) Schedule Performance Index (SPI) Formula Interpretation < 1 behind schedule = 1 on schedule EV = Earned Value > 1 ahead of PV = Planned Value schedule SPI = EV/PV <1 =1 >1 Cost Performance Index (CPI) Schedule Variance (SV) CPI = EV/AC sometimes the term EV = Earned Value ‘cumulative CPI’ AC = Actual Cost would be shown, which actually is the CPI up to that moment < 0 Behind schedule = 0 On schedule EV = Earned Value > 0 Ahead of PV = Planned Value schedule SV = EV – PV CV = EV – AC Cost Variance (CV) Estimate at Completion (EAC) if original is flawed Estimate at Completion (EAC) if BAC remains the Over budget On budget Under budget <0 =0 EV = Earned Value > 0 AC = Actual Cost Over budget On budget Within budget if the original estimate is based on EAC = AC + New ETC wrong AC = Actual Cost data/assumptions or New ETC = New Estimate to Completion circumstances have changed the variance is caused by a one-time event AC = Actual Cost and is not likely to EAC = AC + BAC – EV 15 12 PMP EVM Formulas Name (Abbreviation) same Estimate at Completion (EAC) if CPI remains the same Estimate at Completion (EAC) if substandard performance continues Formula Interpretation BAC = Budget at completion happen again EV = Earned Value if the CPI would remain the same till end of project, i.e. the BAC = Budget at completion original estimation is CPI = Cost performance index not accurate EAC = BAC/CPI EAC = AC + [(BAC -EV)/(CPI*SPI)] AC = Actual Cost BAC = Budget at completion EV = Earned Value CPI = Cost Performance Index SPI = Schedule Performance Index use when the question gives all the values (AC, BAC, EV, CPI and SPI), otherwise, this formula is not likely to be used TCPI = (BAC – EV)/ (BAC – AC) To-Complete Performance Index (TCPI) BAC = Budget at completion EV = Earned value AC = Actual Cost < 1 =1 TCPI = Remaining Work > 1 Under budget On budget Over budget /Remaining Funds BAC = Budget at completion EV = Earned value CPI = Cost performance index Estimate to Completion Variance at Completion ETC = EAC -AC EAC = Estimate at Completion AC = Actual Cost VAC = BAC – EAC <0 =0 BAC = Budget at completion > 0 EAC = Estimate at Completion Over budget On budget Under budget Additional Resources After understanding the above and memorizing the EVM formulas, PMP aspirants should be able to answer PMP EVM calculation questions. Now it is time to test your understanding of EVM 16 calculation by going through some practice questions at the article tips and skills on how to answer all PMP EVM questions correctly — 20+ practice questions on PMP EVM are also included to help you hone your EVM skills and all questions are fully explained. Source: http://edward-designer.com/web/pmp-earned-value-questions-explanined/ 17