Question

Directions – Analyzing Performance: Answer the following questions. Must show all supporting work to receive full credit. Scenario: Suppose you just signed a contract with a consulting firm called Dr. Pete’s Consulting for developing an IS. Project Budget, Schedule, Tasks: $10,000 3 months 10 Tasks $1,000 per task -4 tasks 1st month -3 tasks 2nd month -3 tasks 3rd month At the end of Month 1, you receive the following invoice: Invoice: Dr. Pete’s Consulting Amount Due: $5,000 Payment Due: Immediately Work Completed for Month 1 Task 1: $2,000 Task 2: $1,000 Task 3: $2,000

How is the project doing regarding budget and schedule?
What is the estimate at completion (EAC) assuming variances encountered will likely continue for the remainder of the project?

Answer 1

The project is over budget and behind schedule. The estimate at completion (EAC) is $16,667 assuming variances encountered will likely continue for the remainder of the project.

Step-by-step explanation:

The project is over budget and behind schedule. The budget for the entire project is $10,000, but at the end of Month 1, the amount due according to the invoice from Dr. Pete's Consulting is $5,000. This means that the project has already used up half of the budget in the first month. In terms of schedule, the project was supposed to be completed in 3 months, but only 3 out of the 10 tasks have been completed at the end of Month 1. Therefore, the project is also behind schedule.

The estimate at completion (EAC) can be calculated by dividing the actual cost of the completed tasks by the percentage of completion. The actual cost of the completed tasks in Month 1 is $5,000 (the amount due according to the invoice). The percentage of completion is 30% ($5,000 / $16,667, the total budget of the project). Therefore, the EAC can be calculated as follows: EAC = Actual Cost / Percentage of Completion = $5,000 / 0.30 = $16,667. This indicates that if the variances encountered in Month 1 continue for the remainder of the project, the total cost of the project is estimated to be $16,667.