Finding Big Variances

Two variances relate to the entire project, and they're both easy to learn. The first variance you don't really know until the project is 100 percent complete. This is the project variance, and it's simply BAC-AC. If your project had a budget of $500,000 and you spent $734,000 to get it all done, then the project variance is $500,000-$734,000, which equates, of course, to -$234,000.

The second variance is part of our forecasting model, and it predicts what the project variance will likely be. It's called the variance at completion (VAC), and the formula

Actual Costs $162,000 \

Budget at Completion

$500,000

\

Earned Value

$150,000

-â–º

-- """

Estimate at Completion $538,344

Estimate at Completion $538,344

Figure 7-14 The EAC can also use the CPI as a modifier.

Name

Formula

Sample Mnemonic Device

Variance

VAR = BAC - AC

Victor

Earned Value

EV = % complete x BAC

Eats

Cost Variance

CV = EV - AC

Carl's

Schedule Variance

SV = EV - PV

Sugar

Cost Performance

CPI = EV/AC

Corn

Index

Schedule

SPI = EV/PV

S (This and the following two spell "SEE")

Performance Index

Estimate at

EAC = BAC/CPI

E

Completion

Estimate to

ETC = EAC - AC

E

Complete

Variance at

VAC = BAC - EAC

Victor

Completion

Table 7-1 Simple Ways to Memorize EVM Formulas

Table 7-1 Simple Ways to Memorize EVM Formulas is VAC=BAC-EAC. Let's say your project has a BAC of $500,000 and your EAC is predicted to be $538,344. The VAC is $500,000-$538,344, for a predicted variance of $38,344. Of course, this formula assumes that the rest of the project will run smoothly. In reality, where you and I hang out, the project's VAC could swing in either direction based on the project's overall performance.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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