Question

You have a fixed deadline project with a budgeted cost of 600,000 USD. So far you have spent 300,000 USD and the value of the completed work is 275,000 USD. However, as per the schedule you should have earned 325,000 USD to date.

Calculate the Estimate at Completion (EAC).

Solution:

Given in the question:

Budget at Completion (BAC) =

600,000 USD Actual Cost (AC) =

300,000 USD

Earned Value (EV) =

275,000 USD Planned

Value (PV) = 325,000

USD

To calculate the EAC, first you have to calculate the CPI

and SPI. SPI = EV/PV

= 275,000/325,000

= 0.85

CPI = EV/AC

= 275,000/300,000

= 0.92

Now, you can use the formula

EAC = AC + (BAC – EV)/(CPI*SPI)

= 300,000 + (600,000 - 275,000)/(0.85*0.92)

= 300,000 + 325,000/0.78

= 300,000 + 416,000

= 716,000

Hence, the Estimate at Completion is 716,000 USD.

Practice Question:

You have a project with a budgeted cost of 300,000 USD. So far you have spent 100,000 USD and the value of the completed work is 80,000 USD. However, as per the schedule you should have earned 90,000 USD to date.

Client is insisting to complete the project on time. Calculate the Estimate at Completion (EAC).

Answer 1

To calculate the Estimate at Completion (EAC) for the project, you first determine the Cost Performance Index (CPI) and the Schedule Performance Index (SPI), then apply the formula EAC = AC + (BAC – EV)/(CPI * SPI). The computed EAC for the given practice question is approximately $408,988.76.

Step-by-step explanation:

The subject of this question falls under Business, specifically related to the concept of project management and cost control within the discipline. The question involves calculating the Estimate at Completion (EAC) which is a projection of the total cost of a project based on current performance.

To solve the practice question given:
Budget at Completion (BAC) = $300,000
Actual Cost (AC) = $100,000
Earned Value (EV) = $80,000
Planned Value (PV) = $90,000

First, calculate the Cost Performance Index (CPI) and the Schedule Performance Index (SPI):
CPI = EV/AC = $80,000/$100,000 = 0.8
SPI = EV/PV = $80,000/$90,000 = 0.89

Now use these indices to calculate the EAC:
EAC = AC + (BAC – EV)/(CPI * SPI)
EAC = $100,000 + ($300,000 - $80,000)/(0.8 * 0.89)
EAC = $100,000 + $220,000/0.712
EAC = $100,000 + $308,988.76
EAC = $408,988.76

Therefore, the Estimate at Completion for the project, should it continue on the current trajectory and the client insists on completing the project on time, is approximately $408,988.76.