Project Management

Question

A project manager is reviewing project performance. Which of the following would be the BEST indicator of the total project cost?

A.      AC

B.      EAC

C.      CPI

D.      ETC

Answer 1

Let's look at the answers and see what each means:

1. AC - Actual Cost - the actual cost spent to date on a project.
2. EAC - Estimated at Completion - the estimated total cost of a project and the completion of the project.
3. CPI - Cost Performance Index - the comparison of actual costs incurred vs. earned value, calculated as EV/AC
4. ETC - Estimated to Completion - the estimate of the cost of the remaining work of the project.

Suppose a project consists of building a 10 mile road. The road is planned to cost $1,000 per mile. So far, 3 miles of road have been finished and the total payments made to the construction company have been $5,000.

1. The AC - Actual Cost is $5,000. This is the actual cost that the project has incurred to date, regardless of the planning or estimates.
2. The EAC was originally $10,000 at the beginning of the project (10 mile x $1,000 per mile), but today the EAC is $12,000 ($5,000 AC + 7 miles remaining x $1,000).
3. The CPI is EV/AC. Earned value is $3,000 (3 miles completed x $1,000 per mile). AC is $5,000 as described above. CPI = 3/5 or 0.6.
4. The ETC is $7,000 (7 miles remaining x $1,000 per mile).

The answer is B - EAC which shows the total cost of the project.