# Life and Spiritual Coaching

## May 23, 2008

### PMP Formulas

Filed under: PMP — by Donna Ritter @ 3:06 pm
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# Formulas (turquoise)

Acronym

Terminology/Phrase

Formula(s)

Real Meaning /Reference

EV or BCWP

Earned Value or

Budgeted Cost of the Work Performed

EV = %completed * BAC

·         How much work was actually done as described in the budget

·         A method for measuring project performance.  It compares the amount of work planned with what was actually accomplished to determine if cost and schedule performance is as planned.   Earned  Value (EV), is a percentage of the total budget equal to the work actually performed.

PV or BCWS

Planned Value or

Budget Cost of Work Scheduled

·         How Much work should be done (The estimated value of the planned work)

·         The budget that is part of the approved cost estimate planned to be spent on the activity during a given period

AC or ACWP

Actual Cost or

Actual Cost of the Work Performed

·         What is the actual cost incurred?

·         What have we spent to date?

·         The actual cost that is the total of direct and indirect costs incurred in accomplishing work on the activity during the given period

BAC

Budget At Completion

Budget at completion

·         How much did you budget for the job? The total budget.

Variance

Variance = BAC – AC

·         Planned – actual (i.e. planned was three weeks, actual was two weeks – resulting in a one week variance)

Percentage complete

%complete = EV/BAC

CV

Cost Variance

CV =   EV – AC

·         Any difference between the estimated cost of an activity and the actual cost of that activity

SV

Schedule Variance

SV =    EV – PV

·         Any difference between the scheduled completion of an activity and the actual completion of that activity

CPI

Cost Performance Index

CPI = EV/AC

CPI <1 means over budget

CPI >1

cost are below budget

CPI equal to 1 means costs equal benefits

·         Used to forecast project cost at completion

·        The ratio of budget cost to actual costs.

SPI

Schedule Performance Index

SPI = EV/PV

SPI <1  project will be late

SPI  > 1`project is ahead of schedule

SPI equal to 1 means costs equal means project is on scheule

·         Used to forecast project completion date

·        The SPI is used in some application areas to forecast the project completion date.

Cumulative CPI

Sum of all individual EV divided by the sum of all individual AC

Critical Ratio

SPI * CPI

Critical Path uncertainty

The Critical Path uncertainty = the sum of the (square root of the variances)

EAC

Estimate At Completion

Several possible calculations depending upon the status of the project

EAC

Estimate At Completion

EAC = BAC  / CPI

·         Used if no variances from BAC or you will continue at the same rate of spending.

·         Most commonly used on PMP exams

EAC

Estimate At Completion

EAC=AC+ETC

·         Used when original estimate is flawed

·         Actual plus new estimate for remaining work.

EAC

Estimate At Completion

EAC=AC + (BAC –EV)

·         Used when current variances are atypical of the future.

·         Actual to date plus remaining budget.

EAC

Estimate At Completion

EAC=(AC + (BAC -EV))/CPI .

·         Used when variances are thought to be typical of the future

·         Actual to date plus remaining budget modified by performance

ETC

Estimate To Completion

ETC = EAC – AC

·         How much will the project cost

VAC

Variance At Completion

VAC  = BAC – EAC

·         How much over budget will we be at ten end of the project?

Slack

(LS-ES) or (LF-EF)

ES

Early Start

EF –  duration + 1

EF

Early Finish

ES + duration – 1

LS

Late Start

LF – duration + 1

LF

Late Finish

LS +  duration -1

FF

Free Float

ES (of successor) – EF (of current task) – 1

·         amount of time the current activity can be delayed without delaying the early start of the successor task

TF

Total Float

LF – EF (of current task)

·         amount of time the current activity can be delayed without delaying the LF of the entire project.

Budget Burn Rate (linear)

BAC / planned duration

·         Example (\$1,000 / 4 weeks = \$250 per week)

Actual Burn Rate (linear)

AC / Actual duration

·         Example (\$1,200 / 5 weeks = \$240 per week)

Excepted Value

Probability (%) * consequences

Simple Interest

Interest = Principle X Rate x Time

EMV

Expected Monetary Value

EMV = Odds of occurrence x amount at stake

Present Value

Present Value = FV/(1+r)n

FV = Future Value

r = Interest Rate

n    = # of periods

Future Value

FV = PV x (1 + i)

n = Number of time periods (years)

PV = Present value (of money)

i = interest rate

Pay back

Pay back = period of time to recover investment through cash flow

##### BCR

Benefits Cost Ratio

BCR greater than 1 is good

BCR less than 1 is bad

BCR equal to 1 means costs equal benefits

Opportunity cost

No calculation

·         Defines the opportunity given up by selecting one project over another

IRR

Internal Rate of Return

Complex calculations requiring computer

·         If a company has more than one project to invest, the company may look at projects’ return and then select the highest one.

Fixed Cost

·         Resource constrained scheduling, end date may vary

Fixed Time

·         Resource variable scheduling, end date fixed

NPV

Net Present Value

To calculate you need to calculate the present value of both income and revenue figures and then add up the present values

·         The present value of the total benefits (income or revenue) less the costs.

# Valuable Hint NOT Written in Project Management Books About Costs

(Or more succinctly “How to know you’re in trouble”)

When EV (BWCP) is used in an equation, it always goes first:

CV = EV – AC

If you get a negative number, your project is over budget.

SV = EV – PV

Again, if you get a negative number, your project will overrun its schedule.

N (N-1) / 2

# Program Evaluation and Review Technique (PERT)

## Other Notes

PERT assumes a beta distribution

Weighting –  Pessimistic = 1, Most likely = 2  and  Optimistic =3

(P-O)/6

[ (P-O) / 6]

# Project Variance

Project Variance = Take the square root of the sum of the task variances

# Conventional Critical Path Methodology

 A to B Finish to Start  (FS) zero delay Start to Start (SS) implies delay on B after Start of A Finish to Finish A must finish before B Start to Finish A must start before B can finish

# Measures of Central Tendency (Mean, Median, Mode)

## Mean

The mean is the sum of the measures divided by the number of measurements

## Mode

The mode is the most frequent occurring observation in the data under consideration.

If the observation has two modes, then the data is said to be bi-modal distribution.

If the observations have three or more modes, then the mode is no longer a viable measure of central tendancy.

2,2,2,3,3,5,7,10,12

mode = 2

# Measures of Variability

## Range

The range is the difference between the largest measure and the smallest measurement.

The range does not use all available observations.  It uses only the two extreme values.  It will have the same dimension, or unit of measure as the original data.

## Standard Deviation

The standard deviation is the positive square root of the variance.

12.67  = 3.56

# Normal Distribution

= 68.26

= 94.36

= 99.73

= 99.99

Note   68.26/2 = 34.13   which is 50% above the one sigma mean and  50% below one sigma mena.

# Other

·         UCL / LCL Upper Control Lime & Lower Control Limit on a control chart

·         Pareto:  80% of problems come from 20% of the work

·         Crashing:  Slope = Crash Cost – Normal Cost/Crash Time – Normal Time

·         Progress Reporting:  0/100; 50/50; 20/80

·         Standard Deviation of a project = Square Root of  Sum of Critical Path Variances

·         Slack = LST – EST (Latest Start Time – Earliest Start Time)

= LFT – EFT (Latest Finish Time – Earliest Finish Time)

# Histogram

Variance & Standard Deviation

Find the mean (x-bar)

Determine the Range (R)

Subtract the mean from every observation (n)

Determine Classes (K)

Square each result

Determine Class Width (H) where H = R/K

Construct Frequency table

Divide that number by n-1 (for the sample) or N (for the population)

This is the Variance

Plot Data

This is the Standard Deviation

# Binomial Distribution (Success or Failure)

·         A coin will be tossed 5 times but the coin is biased so that the probability of heads for each toss is 0.04. Heads is success, tails is failure.

·         N = number of items in the sample (the number of coin tosses)

·         X = number of items for which the probability is desired (number of Heads)

·         In Appendix A we go to column N and find where N = 5

·         In Appendix A we go to where p = 0.40

·         Each row represents the probability of 0, 1,2, 3, 4, and 5 successes

# Poisson Distribution

·         A light bulb manufacturer has a known defective rate of 4%. From a sample of 40, the probability of 4 or more defective light

·         µ = np = (40) (.04) = 1.6

·         Probability of 4 or more defective is = 1 – probability of 3 or less defective

·         In the table, find where µ = 1.6

·         Add up the numbers where x has a value of 0, 1, 2, or 3 (this is the P of 3 or less defectives)

·         Subtract that number from 1.0

·         Find np (sample x defective rate)

·         Calculate up to by going to the table, finding np, adding it up

·         Subtract that answer from 1 to x or greater probability

# NormalDistribution (also known as Gaussian)

·         If process produces parts with mean of _ and standard Deviation of _, what is the P that one random part has a measurement of _?

·         Mean time of a bank transaction is 5.25 with a standard deviation of 0.75 minutes and the values are normally distributed. What is the probability that a transaction will occur between 4.0 and 5.25 minutes and below 4.0?

·         Z = 4.0 – 5.25/ 0.75 = -1.67

·         Go to Appendix A and find 1.67 = 0.4525

·         Because we know that µ is 5.25, the probability that a transaction will take less than 5.25 is .05 (1/2)

·         Therefore, the probability that a transaction will be less than 4 minutes = 0.5 – 0.4525 = 0.0475

Sampling Distributions (number of standard Deviations that a sample mean is away from the population mean)

·         If normal distribution with mean of _ and SD of _. From sample of _ what is P that the sample mean is >, <, =, or between _?

·         Hospital emergency room where it has a record waiting time of 30 minutes with a standard deviation of 5 minutes. If a sample of 35 is measured, what is the probability that the sample mean would be greater than 31.5 minutes?

·         Do the Z calculation to get 1.77

·         Find 1.77 in Appendix A (go to 1.7 and then across to 0.07)

·         Subtract that probability from the .5 probability = .50 – .4616 = .0384

·         This tells us that there is only a .0384 probability that, from the sample of 35, the sample mean will be greater than 31.5.

# Measure of shapes (skewness)

## Beta Distribution = skewed in one direction

   Some of the literature refers to this as Basic rather than budgeted.

    The simple way to remember CPI and SPI is these are ratios of the CV and SV.  If you know the CV and SV formulas, remember CPI and SPI are rations.