Question

Assume we're halfway through a year-long project that has a total budget of $100,000. The amount budgeted through this six-month mark is $55,000. The actual cost through this six-month mark is $45,000. So far, we have completed the work that worth half of the total budget. Find the following: BAC

Answer 1

The Budget at Completion (BAC) for the year-long project is the initial total budgeted cost, which is $100,000.

Step-by-step explanation:

In this scenario, we are given several key pieces of information regarding a year-long project's financial status at the halfway point. To clarify, the Budget at Completion (BAC), which we are asked to find, represents the initial total budgeted cost of the project. Here's how we determine the BAC based on the provided details:

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• The total projected budget for the project is $100,000.
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• The amount budgeted for completion up to the six-month mark is $55,000.
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• The actual cost incurred until this point is $45,000.
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• The work completed so far is worth half the total projected budget, which would also be $50,000 since it represents half of the $100,000 total budget.

Given these details, we conclude that the Budget at Completion (BAC) for the project is the initial total budgeted cost, which is $100,000.

Answer 2

The Budget at Completion (BAC) for the year-long project is $110,000, calculated based on the actual cost, the budgeted cost through six months, and the completion of half the work. This indicates a projected overrun of $10,000 beyond the initial budget of $100,000. The project's cost performance index suggests that additional resources may be needed to meet the original budget.

Step-by-step explanation:

The Budget at Completion (BAC) is a crucial metric in project management, representing the total budget allocated for a project. In this scenario, where the project spans one year with a total budget of $100,000, and the halfway point has been reached, the BAC can be calculated by determining the proportion of work completed against the total budget.

At the six-month mark, the project has spent $45,000, and the planned budget (Budgeted Cost of Work Scheduled - BCWS) for this period is $55,000. To find the BAC, we use the formula:

`\[ BAC = (Actual Cost of Work Performed - ACWP)/(Cost Performance Index - CPI) \]`

Since the work completed is half of the total budget, the proportion of work performed is
`\( (1)/(2) \)`. The BCWS is
`\( (1)/(2) \)` of the total budget, which is $50,000
`(\( (1)/(2) * $100,000 \))`. Therefore, the BAC is:

`\[ BAC = (Actual Cost)/(Cost Performance Index) * 100,000 \]`

In this case,
`\( BAC = (45,000)/((45,000)/(55,000)) * 100,000 \)`, which simplifies to $110,000. This means that based on the current performance, the total project cost is projected to be $110,000 by the end of the year, exceeding the initially budgeted $100,000.