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