How to Calculate the Earned Value

Table of contents:

2024 Author: Samantha Chapman | [email protected]. Last modified: 2023-12-17 09:13

Earned Value Analysis is a proven technique for accurately measuring the financial situation of a project. Furthermore, this methodology is an effective means of projecting the total cost of a project upon completion.

Steps

Part 1 of 7:

Step 1. Prepare a project plan

To harness the power of Earned Value analysis, the program must define, for each project activity, when it should take place and how much it should cost.

Step 2. List the activities required to complete the project

Step 3. Identify the resources needed to perform each task

Include labor and materials.

Step 4. Determine the amount of each resource that will be needed for each task

Step 5. Determine the unit cost of each resource, which will be an hourly rate for the work

Step 6. Determine the expected cost of carrying out each activity

Multiply the hourly rate of each required work resource by the number of hours needed.
Add this product for all required manpower resources.
Calculate the total cost of materials needed to complete the task.
Add any additional charges for items such as equipment rental, insurance, transportation, government taxes, etc.
The total is the budgeted cost for the activity.

Step 7. Estimate the duration of each operation

This is the time it takes to complete an operation, not the hours of work (applied time) required to complete it.

Step 8. Identify the prerequisites for each activity

Prerequisites are the tasks that must be completed before a certain activity can be started.

Step 9. Use project scheduling software or manually determine start and finish dates for each task

A spreadsheet is often used for small projects.

Part 2 of 7: Determine the Actual Cost of the Work Performed

Step 1. Define a "project timeline"

Step 2. Determine the actual costs accrued on the project through the defined timeline

The total is shown as "Actual Cost of Work Performed" (ACWP).

Part 3 of 7: Calculate the Estimated Cost of Scheduled Labor

Step 1. Identify scheduled tasks that need to be completed before or during the timeline

Calculate the total budgeted cost of these activities.

Step 2. List the activities that need to start before the timeline, but are not expected to finish before that date

These are activities in progress (WIP). Determine the percentage of each WIP that should be completed within your timeline. Multiply the total budgeted cost by this percentage for each of the activities.

Step 3. Add the partial costs of activities in progress to the total of those scheduled to be completed

The value obtained will be the budgeted cost of the planned work (BCWS).

Part 4 of 7:

Step 1. Calculate the total budgeted cost of the tasks that have actually been completed

Step 2. Identify tasks that have been started but not yet completed

Estimate the percentage of completion for each of these activities and multiply it by the budgeted cost for each.

Step 3. Add the calculated totals for partially completed tasks to the budgeted costs of completed ones

The total is the budgeted cost of the work performed (BCWP).

Part 5 of 7: Calculate the Schedule Variance and Schedule Performance Index

Step 1. To determine Schedule Variance (SV), subtract the budget cost of the scheduled work from the budget cost of the work performed

SV = BCWP - BCWS
A successful Schedule Variance result indicates that the project is ahead of schedule.

Step 2. Divide the budgeted cost of the work performed by the planned cost of the scheduled work to calculate the Schedule Performance Index (SPI)

SPI = BCWP / BCWS
If the SPI value is greater than 1, it means that the project is ahead of schedule.

Part 6 of 7:

Step 1. Subtract the "actual cost of the work done" from the "budgeted cost of the work done" to determine the cost variance (CV)

CV = BCWP - ACWP
A positive cost variance indicates that the project is within budget.

Step 2. Divide the "budgeted cost of work done" by the "actual cost of work done" to calculate the cost performance index (CPI)

CPI = BCWP / ACWP
If the CPI is greater than 1 it means that the project is within the budget.

Part 7 of 7:

Step 1. Calculate the budgeted cost for the entire project by adding the BCWS for all project activities

The resulting total is known as the "completion balance" (BAC).

Step 2. There are 2 methods of estimating the total cost of a project upon completion ("estimate upon completion" or EAC)

It is recommended that you use the method that is most appropriate for your project circumstances.

If the current cost variance is the result of an unexpected event that shouldn't recur anyway, then the BCWS for the rest of the project is probably still valid. Subtract the variance of costs from the completion budget to estimate the total cost of the project at the end: EAC = BAC - CV.
In the event that the current cost variance is the result of circumstances that may continue (such as higher than expected labor costs), divide the completion budget by the cost performance index in order to estimate the total cost of the project: EAC = BAC / CPI.

How to Calculate the Expiry Value: 6 Steps

The maturity value is the amount owed to an investor at the end of the holding period of a debt security (maturity date). For most bonds, the maturity value is the face value of the bond itself. For some certificates of deposit (CDs) and other investments, all interest is paid on maturity.

3 Ways to Calculate the Value of Your Gold

If you have gold, you can sell it, but for what amount? Gold prices tend to rise when the economy is not growing or there are concerns about war and inflation. But before you take your gold jewelry, fillings, teeth, nuggets or bars to a gold dealer, you should know exactly what it is worth, to make sure you are getting an adequate amount.

How to Calculate Net Asset Value: 3 Steps

The Net Asset Value (in English Net Asset Value or NAV) is a calculation that determines the price of a unit in a mutual fund. While stock prices fluctuate within minutes - or even seconds - a mutual fund's NAV is adjusted at the end of each business day, making it much easier for investors and brokers to keep track of.

How to Calculate the Value of a Bond: 7 Steps

A bond is a debt security issued by a company or public entity that gives its holder the right to repayment of the capital loaned to the issuer (usually € 1000) at the maturity of the bond, plus periodically paid interest (usually every six months or annually) on this sum.

How to Calculate Sensitivity, Specificity, Positive Predictive Value and Negative Predictive Value

For each test performed on a reference population, it is important to calculate the sensitivity , the specificity , the positive predictive value , and the negative predictive value in order to determine how useful the test is for detecting a disease or characteristic in the target population.