Learning the Fundamentals

EVM, in regards to cost management, is concerned with the relationships between three formulas that reflect project performance. Figure 7-6 demonstrates the connection between the following EVM values:

• Planned value (PV) Planned value is the work scheduled and the budget authorized to accomplish that work. For example, if a project has a budget of $500,000 and month six represents 50 percent of the project work, the PV for that month is $250,000.

• Earned value (EV) Earned value is the physical work completed to date and the authorized budget for that work. For example, if your project has a budget of $500,000 and the work completed to date represents 45 percent of the entire project work, its earned value is $225,000. You can find EV by multiplying the percent complete times the project's budget at completion (BAC).

• Actual cost (AC) Actual cost is the actual amount of monies the project has required to date. In your project, your BAC, for example, is $500,000 and your earned value is $225,000. As it turns out, your project team had some waste, and you actually spent $232,000 in actual monies to reach the 25-percent-complete milestone. Your actual cost is $232,000.

That's the fundamentals of earned value management. All of our remaining formulas center on these simple formulas. Just remember that earned value is always the

Budget at Completion $500,000

Budget at Completion $500,000

spent to reach this project should be point in the project

Figure 7-6 Earned value management shows project performance.

spent to reach this project should be point in the project

Figure 7-6 Earned value management shows project 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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