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Cost Management

How are you using the Budget ?
Cost Management Process
   Cost Estimation
        How much each activity is going to cost
        me and how long it is going to take

   Budgeting Process
        Estimates are added-up and base lined


    Control Process
        How you are doing compared to how
        you thought you would do
http://www.radiantminds.co.in
Planned Value
    Budget At Completion (BAC)

        This is the total budget you have for
        your project

       How much you planned to spend on
        your project

       To tell the sponsor the total amount of
        value needed for the project
http://www.radiantminds.co.in
Planned Value
    Planned % Complete

        Your team should have done 300 Hrs of
        work so far out of 1000 Hrs, so planned
        % complete is 30%




http://www.radiantminds.co.in
Planned Value (PV)
    Planned Value (PV)

        How much of budget you planned on
        using so far

       BAC is $200,000
       Planned % complete is 30%

       PV = $60,000

http://www.radiantminds.co.in
Earned Value (EV)
    How much work you have been able to
    accomplish with the money you have
    been given

    You can determine how far off-track
    your project actually is




http://www.radiantminds.co.in
Earned Value (EV)
    Write down your BAC

    EV = BAC X Actual % completion

    BAC = $ 200,000
   Actual % completed is 35%

    EV = $200,000 X .35 = $ 70,000


http://www.radiantminds.co.in
How Is your project doing?
    Schedule Performance Index (SPI)

        SPI = EV / PV


    Schedule Variance (SV)

        SV = EV - PV




http://www.radiantminds.co.in
Are you over budget
    Actual Cost (AC) – Amount of money
    you spent so far on the project

    Cost Performance Index (CPI)

        CPI = EV / AC


    Cost Variance (CV)

        CV = EV - AC

http://www.radiantminds.co.in
Diff. between EV and AC
    EV – measures the work that has been
    done

    AC – Tells how much you have spent
    so far

    When CPI is less than 1 and CV is
    negative that means your sponsor is
    not getting his money’s worth of value
    from the project
http://www.radiantminds.co.in
Summary
BAC         How much money you will spent on your project


PV          What your schedule says you should have spent


EV          How much of the project value you really earned


AC          How much you have actually spent so far


SPI         Whether you are behind or ahead of schedule


SV          How much behind or ahead of schedule you are


CPI         Whether you are within your budget or not


CV          How much above or below your budget you are
http://www.radiantminds.co.in
Forecasting
    Estimate at Completion (EAC)

        EAC = BAC / CPI


    Estimate to Complete (ETC)

        ETC = EAC - AC




http://www.radiantminds.co.in
Forecasting
    Variance at Completion

        VAC =         BAC - EAC




http://www.radiantminds.co.in
Pm 8 cost_management
Pm 8 cost_management
Pm 8 cost_management
Pm 8 cost_management

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Pm 8 cost_management

  • 1. Cost Management How are you using the Budget ?
  • 2. Cost Management Process Cost Estimation  How much each activity is going to cost me and how long it is going to take Budgeting Process  Estimates are added-up and base lined  Control Process  How you are doing compared to how you thought you would do http://www.radiantminds.co.in
  • 3. Planned Value  Budget At Completion (BAC)  This is the total budget you have for your project How much you planned to spend on your project To tell the sponsor the total amount of value needed for the project http://www.radiantminds.co.in
  • 4. Planned Value  Planned % Complete  Your team should have done 300 Hrs of work so far out of 1000 Hrs, so planned % complete is 30% http://www.radiantminds.co.in
  • 5. Planned Value (PV)  Planned Value (PV)  How much of budget you planned on using so far BAC is $200,000 Planned % complete is 30% PV = $60,000 http://www.radiantminds.co.in
  • 6. Earned Value (EV)  How much work you have been able to accomplish with the money you have been given  You can determine how far off-track your project actually is http://www.radiantminds.co.in
  • 7. Earned Value (EV)  Write down your BAC  EV = BAC X Actual % completion  BAC = $ 200,000 Actual % completed is 35%  EV = $200,000 X .35 = $ 70,000 http://www.radiantminds.co.in
  • 8. How Is your project doing?  Schedule Performance Index (SPI)  SPI = EV / PV  Schedule Variance (SV)  SV = EV - PV http://www.radiantminds.co.in
  • 9. Are you over budget  Actual Cost (AC) – Amount of money you spent so far on the project  Cost Performance Index (CPI)  CPI = EV / AC  Cost Variance (CV)  CV = EV - AC http://www.radiantminds.co.in
  • 10. Diff. between EV and AC  EV – measures the work that has been done  AC – Tells how much you have spent so far  When CPI is less than 1 and CV is negative that means your sponsor is not getting his money’s worth of value from the project http://www.radiantminds.co.in
  • 11. Summary BAC How much money you will spent on your project PV What your schedule says you should have spent EV How much of the project value you really earned AC How much you have actually spent so far SPI Whether you are behind or ahead of schedule SV How much behind or ahead of schedule you are CPI Whether you are within your budget or not CV How much above or below your budget you are http://www.radiantminds.co.in
  • 12. Forecasting  Estimate at Completion (EAC)  EAC = BAC / CPI  Estimate to Complete (ETC)  ETC = EAC - AC http://www.radiantminds.co.in
  • 13. Forecasting  Variance at Completion  VAC = BAC - EAC http://www.radiantminds.co.in