[PMP Study Notes] Chapter 7 Project Cost Management

⚫ Cost Control—Tools and Techniques: Forecasting—ETC, EAC (P264)

⚫ Cost Control—Tools and Techniques: Forecasting—— Four Calculation Formulas of EAC (P264)

⚫ Cost Control—Tools and Techniques: To-Complete Performance Index----TCPI (P266)

⚫ English full name of each index of earned value management

BAC = Budget at Completion----completion budget

AC = Actual Cost ---- actual cost

EV = Earned Value----Earned Value

PV = Planned Value----planned value

CV = Cost Variance ---- cost deviation

SV = Schedule Variance ---- progress deviation

CPI = Cost Performance Index ---- cost performance index

SPI = Schedule Performance Index ---- schedule performance index

ETC = Estimate to Complete ---- completion still needs to be estimated

EAC = Estimate at Completion----completion estimate

TCPI = To-Complete Performance Index----complete performance index

VAC = Variance at Completion----completion deviation

⚫ Summary of earned value management calculation questions

In order to ensure the correct rate of earned value management calculation questions, the following contents must be mastered:

① Find the BAC, PV, EV, AC in the title;

② Determination of typical or atypical;

③ Keep in mind the following formula:

Progress Deviation SV = EV – PV
Cost deviation CV = EV – AC
Schedule Performance Index SPI = EV/PV
Cost Performance Index CPI = EV/AC
Typical EAC = BAC / CPI
Atypical EAC = AC + (BAC – EV)
Schedule cost also acts EAC = AC + (BAC – EV) / (CPI × SPI)
TCPI = （BAC - EV） / （BAC - AC）或TCPI = （BAC - EV） / （EAC - AC）

EV either appears in front or in the numerator

⚫ Supplementary knowledge--types of costs

⚫ Supplementary knowledge--some financial concepts that need to be mastered

Internal rate of return IRR (Internal Rate of Return) - the discount rate when the net present value is equal to zero. It represents the size of the project's ability to resist risks (inflation, etc.). The bigger the better.
Payback Period PP (Payback Period)----From the date of construction of the project, the number of years required to repay the original investment with the net income from the project. The time value of money is not considered. The shorter the better (PMP generally only considers the static payback period)

ROI (Return On Investment) ---- annual average profit / total investment × 100% Regardless of the time value of money, the annual average profit is all profits. The bigger the better.

Benefit-Cost Ratio BCR (Benefit-Cost Ratio)----the ratio of the relationship between project investment and benefit, income/investment BCR > 1--accept the project; BCR < 1--abandon the project; the bigger the better

⚫ Summary of financial concepts

Definitions, tools and outputs for estimating costs
Difference between contingency reserve and management reserve
Tools and outputs for sequencing activities
Develop budget definitions, tools and outputs
Earned Value Analysis: Meaning of BAC, PV, EV, AC
Deviation Analysis: Formulas and Meanings of SV, CV, SPI, CPI
Trend Analysis: Formulas and Meanings of EAC and ETC
The formula and meaning of TCPI

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[PMP Study Notes] Chapter 7 Project Cost Management

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