PMP Process — Managing Technical Aspects Practice Question
Your project is using a predictive approach, and you are at the midpoint. The earned value analysis shows: EV = $450,000, PV = $500,000, AC = $550,000. The CPI is 0.82 and SPI is 0.90. The sponsor asks for a forecast of the total cost at completion. What is the best estimate for EAC assuming the current cost performance is typical of future performance?
⚠ Common exam trap
It's easy for candidates to confuse the 'typical' and 'atypical' EAC formulas, selecting the atypical calculation (EAC = AC + (BAC - EV)) which yields $1,100,000, or mistakenly using SPI instead of CPI for cost forecasting.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
$1,219,512
The best estimate for EAC when current cost performance is typical of future performance is calculated using the formula EAC = BAC / CPI. First, derive BAC from the given SPI and PV: SPI = EV / PV → 0.90 = $450,000 / PV, so PV = $500,000 (already given). BAC is the total planned budget, which at the midpoint (50% planned) means BAC = PV / 0.5 = $500,000 / 0.5 = $1,000,000. Then EAC = $1,000,000 / 0.82 = $1,219,512. This assumes the cost inefficiency (CPI = 0.82) will continue for the remainder of the project.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
$1,219,512
Why this is correct
This value represents the Estimate At Completion (EAC) calculated using the formula EAC = BAC / CPI. This specific formula is applied when it's assumed that the project's future cost performance will continue at the same rate as its cumulative Cost Performance Index (CPI) to date. Given a Budget At Completion (BAC) of $1,000,000 and a CPI of 0.82, the calculation yields $1,000,000 / 0.82 ≈ $1,219,512, indicating the project is currently over budget and expected to remain so.
- ✗
$1,250,000
Why it's wrong here
This value might result from an incorrect application of the EAC formula, possibly by misinterpreting the Cost Performance Index (CPI) or using an incorrect value. For instance, if one mistakenly used a CPI of 0.80 instead of 0.82 in the EAC = BAC / CPI formula, the calculation would be $1,000,000 / 0.80 = $1,250,000. This demonstrates a common error where a slight miscalculation or data input leads to a significantly different and incorrect estimate.
- ✗
$1,100,000
Why it's wrong here
This figure does not align with standard Earned Value Management (EVM) formulas for calculating Estimate At Completion (EAC). It might represent a simplistic, non-EVM-based adjustment, such as adding a flat 10% contingency or an arbitrary amount to the Budget At Completion (BAC) without considering the project's actual cost performance to date. Such an approach fails to leverage the predictive power of the Cost Performance Index (CPI) and would not accurately reflect the project's likely final cost based on current trends.
- ✗
$1,050,000
Why it's wrong here
This value is not derived from any recognized Earned Value Management (EVM) formula for Estimate At Completion (EAC) under the given conditions. It could potentially stem from an arbitrary adjustment to the Budget At Completion (BAC), such as adding a fixed percentage (e.g., 5%) or a nominal amount, without properly integrating the project's actual cost performance data. Relying on such an estimate would ignore critical performance indicators like the Cost Performance Index (CPI), leading to an inaccurate and potentially misleading projection of the project's final cost.
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