The PMP calculations are linked to each other. That’s why learning all of them is vital to passing the PMP.
The arrows show the formulas that are needed by the target formula.
(The dotted arrows show a formula that is required dependent on the scenario)
Actual Cost (AC)
Actual Cost is one of the easiest calculations that you’ll need to know for the PMP. Well there’s no formula involved so that makes it pretty easy right? AC is used to answer the question - “How much have we spent on the project as of today?”
Tip – AC is also known as Actual Cost of Work Performed (ACWP).
As we already said, there’s no formula for AC. But that doesn’t mean there’s no math involved.
To calculate the AC for a project, you add up all the costs incurred by the project as of the point in time you are measuring. Usually this means adding all the costs incurred by the project as of today.
Example of Calculating Actual Cost
Let’s see an example.
Tom is working on a project to install a new Wi-Fi network on the campus of a Palo Alto Smartphone manufacturer.
The project has a budget of $2.5 million and involves numerous contractors. The expected value of the work (e.g. the Wi-Fi network) is $3.6 million dollars. Tom has budgeted $1.2 million for Wi-Fi equipment, $1.1 million for installation costs, employee laptop updates and training. He has also budgeted $200,000 for miscellaneous costs.
The project team has just begun installing the equipment needed – starting with the Wi-Fi antennas.The project has spent $400,000 on Wi-Fi equipment, $50,000 on site surveys, $3,000 on team meetings and team building sessions. Tom will be signing a contract for an extra ten Wi-Fi antenna tomorrow for $30,000.
What is the AC of the project?
Answer: $453,000. How did we calculate this? $400,000 + $50,000 + $3,000 = $453,000.
(The dotted arrows show a formula that is required dependent on the scenario)
Actual Cost (AC)
Actual Cost is one of the easiest calculations that you’ll need to know for the PMP. Well there’s no formula involved so that makes it pretty easy right? AC is used to answer the question - “How much have we spent on the project as of today?”
Tip – AC is also known as Actual Cost of Work Performed (ACWP).
As we already said, there’s no formula for AC. But that doesn’t mean there’s no math involved.
To calculate the AC for a project, you add up all the costs incurred by the project as of the point in time you are measuring. Usually this means adding all the costs incurred by the project as of today.
Example of Calculating Actual Cost
Let’s see an example.
Tom is working on a project to install a new Wi-Fi network on the campus of a Palo Alto Smartphone manufacturer.
The project has a budget of $2.5 million and involves numerous contractors. The expected value of the work (e.g. the Wi-Fi network) is $3.6 million dollars. Tom has budgeted $1.2 million for Wi-Fi equipment, $1.1 million for installation costs, employee laptop updates and training. He has also budgeted $200,000 for miscellaneous costs.
The project team has just begun installing the equipment needed – starting with the Wi-Fi antennas.The project has spent $400,000 on Wi-Fi equipment, $50,000 on site surveys, $3,000 on team meetings and team building sessions. Tom will be signing a contract for an extra ten Wi-Fi antenna tomorrow for $30,000.
What is the AC of the project?
Answer: $453,000. How did we calculate this? $400,000 + $50,000 + $3,000 = $453,000.
Budget At Completion (BAC)
Budget At Completion (BAC) is a measure of how much you estimate the project will cost at its completion.
Tip – BAC is an estimate and is determined at the start of the project.
How is BAC calculated? Usually for the PMP exam you won’t need to calculate it. You will normally be given the BAC in the question as part of figuring out another value. For example, the question may want you to calculate the To-Complete Performance Index. To do that, the BAC could be included in the question text. However, if you do need to calculate the BAC here’s how to do it. BAC is estimated by calculating how much money you believe you will need to complete the project. (There is no formula).
Example of Calculating BAC
Let’s see an example.Dave is the project manager on a project to install a new privacy fence around a five-star hotel.
The materials for the fence are estimated to cost $230,000. The labor is estimated at $95,000. Miscellaneous costs are estimated at $15,000. And training is estimated at $3,000. Ongoing maintenance is estimated at $20,000.
What is the BAC?
Answer: $343,000. How did we calculate this? $230,000 + $95,000 + $15,000 + $3,000 = $343,000.
Planned Value (PV)
Planned Value (PV) is the estimated value of the work to be completed by your project within aspecific time period.
PV is also used to calculate Schedule Variance.
Tip – PV is also known as Budgeted Cost of Work Scheduled – BCWS.PV Formula: Planned Value = Planned % Complete X BAC
Example of Calculating PV
Let’s see an example. Jenny is the project manager on a project to build a new smart-phone browser. The project is expected to last 10 months. The estimated total cost is $2,300,000. What is the PV after 5 months?
Answer: $1,150,000. How did we calculate this? Planned % Complete is the percentage of the project that is planned to be complete. In this case, 5 months / 10 months = 0.5 (or 50% in other words). We know that BAC is the estimated total cost of the project. So in this case, BAC = $2,300,000. With these figures we can calculate that PV = 0.5 x $2,300,000 = $1,150,000.
Budget At Completion (BAC) is a measure of how much you estimate the project will cost at its completion.
Tip – BAC is an estimate and is determined at the start of the project.
How is BAC calculated? Usually for the PMP exam you won’t need to calculate it. You will normally be given the BAC in the question as part of figuring out another value. For example, the question may want you to calculate the To-Complete Performance Index. To do that, the BAC could be included in the question text. However, if you do need to calculate the BAC here’s how to do it. BAC is estimated by calculating how much money you believe you will need to complete the project. (There is no formula).
Example of Calculating BAC
Let’s see an example.Dave is the project manager on a project to install a new privacy fence around a five-star hotel.
The materials for the fence are estimated to cost $230,000. The labor is estimated at $95,000. Miscellaneous costs are estimated at $15,000. And training is estimated at $3,000. Ongoing maintenance is estimated at $20,000.
What is the BAC?
Answer: $343,000. How did we calculate this? $230,000 + $95,000 + $15,000 + $3,000 = $343,000.
Planned Value (PV)
Planned Value (PV) is the estimated value of the work to be completed by your project within aspecific time period.
PV is also used to calculate Schedule Variance.
Tip – PV is also known as Budgeted Cost of Work Scheduled – BCWS.PV Formula: Planned Value = Planned % Complete X BAC
Example of Calculating PV
Let’s see an example. Jenny is the project manager on a project to build a new smart-phone browser. The project is expected to last 10 months. The estimated total cost is $2,300,000. What is the PV after 5 months?
Answer: $1,150,000. How did we calculate this? Planned % Complete is the percentage of the project that is planned to be complete. In this case, 5 months / 10 months = 0.5 (or 50% in other words). We know that BAC is the estimated total cost of the project. So in this case, BAC = $2,300,000. With these figures we can calculate that PV = 0.5 x $2,300,000 = $1,150,000.
