Monitoring & controlling costs, & checking for “variances.”

Note this page was modified on Dec. 3 at 8 AM. There was a typo. error for the calculation for CPI. f=d/e. Also see note on TBC.

• Monitor - check cumulative amount spent at any time point - do planned checks.

• Compare (analyze) above to the budgeted amounts, baselines. Select methods. E.g. CV, CPI

• Control - correct and reforecast final $

• Communicate changes

Methods of analysis. Manual or computerized e.g. MS Project

• Cumulative budget. What had you planned or budgeted at this point.

• Earned Value. Budgeted cost x % of completion

• Cost Performance indicator (CPI)% EV/AC (Actual Cost)

• Cost Variance CV = EV-Actual Cost

• Schedule Variance S.

Above formulas can be used to calculate time as or $

Remember, Cumulative means the amount you have spent or used to the date/point that you are making the calculation.

1). Applied learning – calculate using text book format and numbers, p. 262 on. Put into spaces for a).

2). Now apply it to something you are familiar with:

	Method:		1. Copy numbers from text	2.
a.	Total budget amount $	.
b.	Cumulative budget amount $
c.	Cumulative % of the work completed	Ask workers
d.	Earned value $	*
e.	Cumulative money actually spent
f.	Cost Performance CPI %	d/e
g.	Cost variance $	d-e
h.	Schedule variance	Use time

* TBC. Book has two definitions of what to calculate the earned value from. One is a. The Total Budgeted Cost TBC or b. the Cumulative Budget Cost (CBC). This point is clarified on page 257. Use the Cumulative Budgeted Cost. (CBC) to caculate your Earned Value %.

For the example below I am using the cumulative budget amount to calculate my % of completion. In other words I am comparing what has been done to what should have been done for the cumulative period. (CBC)I am not comparing it to the budget for the entire project period. (TBC).

Now try it on this question:

I am going on vacation 10 days. I have budgeted $200 a day for activities such as day trips, scuba diving, windsurfing, visiting ruins etc. I plan on completing one activity per day. In other words I now have an activity or task list, a budget and a schedule.

At day 7 I have only completed 4 of my activities but spent $1600 of my budget because instead of going on trips I hung around the nightclubs in town – which I had not planned or budgeted for.

What is the Earned Value of my vacation on day 7?

What is the Cost Performance Indicator (%)?

What is the Cost Variance $

What is the Schedule Variance in days?

	Method:
a.	Total budget amount $	.	$2000.	TBC
b.	Cumulative budget amount $		1400	CBC
c.	Cumulative % of the work completed	Ask workers	4 out of 7 = 57%	Not 4 out of 10
d.	Earned value $	bxc	800	EV
e.	Cumulative money actually spent		1600	CAC
f.	Cost Performance CPI %	d/e	800/1600=50%-	CPI
g.	Cost variance $	d-e		CV
h.	Schedule variance (use days)	Use time equivalent d-e	4-8 = 4 days behind	SV