Project Monitoring and Controlling Processes
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The document outlines key financial performance metrics used in project management, including cost variance (CV), schedule variance (SV), cost performance index (CPI), and schedule performance index (SPI), along with their formulas and interpretations. It also explains concepts related to project budgeting and financial evaluation such as estimate at completion (EAC), net present value (NPV), internal rate of return (IRR), and opportunity cost. By analyzing these metrics, project managers can assess budget performance and project progress critical for decision-making.
![Item Formula Remark
Cost Variance (CV) EV – AC Negative value indicates over budget and positive
value indicates under budget
ScheduleVariance (SV) EV – PV Negative value indicates behind schedule and positive
value indicates ahead of schedule
Cost Performance Index (CPI) EV / AC Lesser than one indicates over budget and greater
than one indicates under budget
Schedule Performance Index (SPI) EV / PV Lesser than one indicates behind schedule and greater
than one indicates ahead of schedule
Estimate at Completion (EAC) BAC / CPI Considering that the rate of spending remains the
same
AC + ETC Considering that the current estimate is fundamentally
flawed
AC + (BAC – EV) Considering atypical variances
AC + [(BAC – EV) /CPI] Considering typical variances
Estimate to Complete (ETC) EAC – AC Considering that the current estimate is fundamentally
flawed
BAC – EV Considering atypical variances
(BAC – EV) / CPI Considering typical variances
Variance at Completion (VAC) BAC – EAC Considering the status of the budget expected at the
end of the project](https://image.slidesharecdn.com/unit-iv-150401071907-conversion-gate01/85/Project-Monitoring-and-Controlling-Processes-10-320.jpg)
Project Monitoring and Controlling Processes
- 9. Progress Review EV PV AC SV CV ΔT CumulativeValues Time CV -ve indicates over-budget +ve indicates under-budget SV -ve indicates behind schedule +ve indicates ahead of schedule CPI Indicates INR_ worth of work has been done for each Rupee spent. SPI Indicates that the project is progressing at _% of the rate originally planned. CostVariance (CV) Formula:CV= EV – AC ScheduleVariance (SV) Formula: SV = EV – PV Cost Performance Index (CPI) Formula: CPI = EV/AC Schedule Performance Index (SPI) Formula: SPI = EV/PV
- 10. Item Formula Remark Cost Variance (CV) EV – AC Negative value indicates over budget and positive value indicates under budget ScheduleVariance (SV) EV – PV Negative value indicates behind schedule and positive value indicates ahead of schedule Cost Performance Index (CPI) EV / AC Lesser than one indicates over budget and greater than one indicates under budget Schedule Performance Index (SPI) EV / PV Lesser than one indicates behind schedule and greater than one indicates ahead of schedule Estimate at Completion (EAC) BAC / CPI Considering that the rate of spending remains the same AC + ETC Considering that the current estimate is fundamentally flawed AC + (BAC – EV) Considering atypical variances AC + [(BAC – EV) /CPI] Considering typical variances Estimate to Complete (ETC) EAC – AC Considering that the current estimate is fundamentally flawed BAC – EV Considering atypical variances (BAC – EV) / CPI Considering typical variances Variance at Completion (VAC) BAC – EAC Considering the status of the budget expected at the end of the project
- 11. FinancialTerm Definition Benefit Cost Ratio (BCR) Compares the benefits (revenues) to the costs of different options Chart of Accounts Any numbering system used to monitor project costs by category (for example, labor, supplies, and materials) Depreciation Reduced price of an asset over time attributable to deterioration, obsolescence, and impending retirement Applies particularly to physical assets such as equipment and structures Straight Line depreciation:Standard amount depreciating every year Accelerated depreciation: Value depreciating at a faster rate, for example, Double Declining method and Sum of the Years Digits Internal Rate of Return (IRR) Rate at which the project inflows and project outflows are equal Project with greatest IRR is generally selected Net Present Value (NPV) Present value of the total benefits minus costs over many time periods Investment is profitable for positive NPV Project with greatest NPV is selected Opportunity Cost Opportunity given up by selecting one project over another Payback Period Time period it takes to recover the investment made in the project before the profits start accumulating Present Value The current value of future cash flows. Sunk Cost Expended costs, to be avoided when deciding whether to continue with a troubled project
- 24. THANKS