Question

Your project to obtain charitable donations is now 30 days into a planned 40-day project. The project is divided into three activities. The first activity is designed to solicit individual donations. It is scheduled to run the first 25 days of the project and to bring in $25,000. Even though we are 30 days into the project, we still see that we have only 90 percent of this activity complete. The second activity relates to company donations and is scheduled to run for 30 days starting on day 5 and extending through day 35. We estimate that, even though we should have 83 percent (25/30) of this activity complete, it is actually only 50 percent complete. This part of the project was scheduled to bring in $150,000 in donations. The final activity is for matching funds. This activity is scheduled to run the last 10 days of the project and has not started. It is scheduled to bring in an additional $50,000. So far, $175,000 has actually been brought in on the project.

Calculate the Schedule Variance, Schedule Performance Index, and Cost (actually value in this case) Performance Index. How is the project going? (Hint: Note that this problem is different since revenue rather than cost is the relevant measure. Use care in how the measures are interpreted.)

Answer 1

1. schedule variance = -$52,500

2. SPI = 0.65

3. CPI = 0.56

Step-by-step explanation:

to get the solution, we calculate for BRWS and BRWP

first we calculate the budgeted revenue of the work scheduled for each activity using this formula:

budgeted revenue * planned completion

A = 25,000 x 100percent

= $25000

B = 150,000 x (25/30) percent

= $125000

C = 50000 x 0percent

= 0$

total = $25000+$125000+$0

= $150000

Next we calculate budgeted revenue of work performed (brwp)

calculated using this formula:

budgeted revenue x actual completion

A = 25000 x 90percent

= 22500 dollars

B = 150000 x 50percent

= $75000

C = 50000 x 0%

= $0

total = 22500 + 75000 + 0

= $97500

1. schedule variance = BRWP - BRWS

= $97500 - $150000

= -$52500

we have a negative schedule, telling us that the project is behind schedule

2. schedule performance index = revenue of work performed divided by revenue of work schedule

= 97500/150000

= 0.65

3. cost price index = revenue of work performed divided by actual revenue

= 97500/175000

= 0.56

4. how the project is going:

the schedule performance index (SPI) is 0.65 which is less than 1. this is to say that the project is doing better than planned revenue when we talk of revenue