Top 7 Formulas to Memorize Before Your PMP Exam

If you've done a lot of googling on PMP formulas, you've probably seen many people saying the same 5-6 formulas repeatedly. However, this list is entirely different and should be enough to get you through PMP exam. As long as you memorize this list and understand what they mean, it should be simple to see how they are used in a problem.

Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC)

Cost variance is one of project management software's most important performance measures. It compares the planned costs to what has been spent and shows how much of a variance there is between them.

CV is used to determine whether or not the project is on target or behind schedule.

What Is Cost Variance?

CV measures the difference between planned and actual costs. The CV value is calculated by subtracting the AC from the EV. CV can be calculated for each WBS element (Work Breakdown Structure), work package, and summary task level.

Where Does CV Come From?

CV is measured as a percentage of budgeted cost or budgeted time.

For example, if a project manager has budgeted $25,000 for a particular task but only spent $20,000, their CV would be 20% ($5k / $25k). The percentage of CV should be compared against an acceptable range for that specific task type (e.g., 10% - 30%).

EAC = AC + [BAC – EV / (Cumulative CPI x Cumulative SPI)]

Estimated at Completion (EAC) is the value of the project's remaining work, usually calculated as the sum of the baseline cost estimate and all approved change requests.

An EAC calculation is one way to determine if a project is likely to finish on time and within budget.

For example, suppose you have an EAC that falls short of your original estimate. In that case, you should probably be concerned about missing your deadline.

Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)

The schedule variance is a measure of the performance of a project. It is used to determine whether or not a project is on track and will finish on time or within budget. It is calculated by comparing the earned value to the planned deal.

Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)

The EV is calculated by multiplying the budgeted work cost scheduled by the completion percentage for each unit of work.

For example, if you have 100 units of work planned and you have completed 50% of that work, then the EV would be 50%. If you have spent $1 million on those 50 units, your EV would be $500,000.

The PV is calculated by multiplying the budgeted cost at completion by 100% minus the completion percentage for each unit of work.

For example, if you have 100 units of work scheduled and completed 50% of that work, your PV would be 50%. If you have spent $1 million on those 50 units, your PV would be $2 million.

EAC = AC + Bottom-up ETC

Estimate at Completion (EAC) =Actual Cost (AC) + Bottom-up ETC (Estimate to Complete)

The EAC is the final budget estimate for a project. It considers all changes that have been made to the project and includes all costs incurred during the project's life cycle.

 The EAC is calculated using two different methods: top-down and bottom-up. The bottom-up method uses specific data from each activity in the WBS. Then, it adds them together to get an approximate total cost for the entire project.

The top-down method uses information from higher decomposition levels to estimate completion.

Cost Performance Index (CPI) = EV / AC

To control the cost of a project, one of the most important things is to know how much you are spending on your project. This can be done by calculating the Cost Performance Index (CPI).

Cost Performance Index = EV (Earned Value) / AC (Actual Cost)

EV: The estimated cost for each task in the project schedule. It is calculated by multiplying the duration of each task by the estimated cost and adding them up.

AC: The actual cost spent on each task in the project schedule. It is calculated by multiplying the exact duration of each study by its true cost and adding them up.

Schedule Performance Index (SPI) = EV / PV

The schedule performance index measures the current project status, where SPI > 1 means the project is ahead of schedule. At the same time, SPI < 1 indicates that the project is behind schedule.

Project performance is often measured using the Schedule Performance Index (SPI), which is calculated as follows:

SPI = EV / PV

Where EV stands for earned value and PV stands for planned value. Earned value refers to the actual cost incurred on a specific contract or task during a given period. The planned value refers to the estimated cost or budget on hand at a certain point in time.

EAC = AC + (BAC – EV)

EAC (Estimate at Completion) = AC (Actual Cost) + (BAC (Budget at Completion) – EV (Earned Value))

In the above equation:

AC is the actual cost of work performed on the project up to a point in time. This is also known as the actual cost of work performed or the essential cost.

BAC is the project's budget at completion and is calculated by adding all costs from inception to the current time plus any remaining portions of previous expenses that have not yet been paid.

EV measures how much work was completed on a schedule compared to its planned value (PV). It can be measured using either physical units of measurement or percentage complete.

Conclusion

The most important thing to remember when you are studying for the PMP exam is that passing and failing are not about whether you have learned enough or if you have all the formulas memorized. It is about understanding where these formulas can be used and how you can use them to solve problems in new and different situations.

 Practice by working through as many sample problems as possible and get your hands on every kind of formula before taking the exam. More importantly, understand how each formula can help you become effective at project management. There are hundreds of formulas, but only a few that a PMP candidate will be expected to know and understand to pass the exam.