CAPM®: Key Project Management Calculations

Project managers wear many hats, not the least of which is sometimes that
of a mathematician. In this course, you will explore key project management
calculations like communication formulas to determine the effectiveness and
richness of communication channels or to identify the demand for
communication. Then you will examine estimation formulas like the program
evaluation and review technique (PERT), earned monetary value (EMV), and
float/slack. Next, you will focus on critical path analysis to determine the
longest stretch of tasks that must be completed to execute a given project.
Finally, you will look at earned value and cost management formulas. This
course can be used in preparation for the Certified Associate in Project
Management (CAPM)® exam. Materials from this course are aligned with the
PMBOK® Guide Seventh Edition.

Table of Contents

1. Video: Course Overview (it_capm7_25_enus_01)

2. Video: Communication Formulas (it_capm7_25_enus_02)

3. Video: Estimation Formulas (it_capm7_25_enus_03)

4. Video: Critical Path Analysis (it_capm7_25_enus_04)

5. Video: Earned Value Analysis (EVA) (it_capm7_25_enus_05)

6. Video: Cost Management Formulas (it_capm7_25_enus_06)

7. Video: Course Summary (it_capm7_25_enus_07)

1. Video: Course Overview (it_capm7_25_enus_01)

In this video, we will discover the key concepts covered in this course.

 discover the key concepts covered in this course

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 [Video description begins] Topic title: Course Overview. Presented by: Sven
Batalla. Materials in this course are based upon the text. A Guide to the
Project Management Body of Knowledge (PMBOK® Guide) Seventh Edition,
Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM, are
registered trademarks of the Project Management Institute, Inc. [Video
description ends]

Project managers wear many hats, not the least of which is sometimes that
of a mathematician.

In this course, I’ll introduce key project management calculations like

communications formulas.

I’ll also cover estimation formulas, critical path analysis formulas, and earned
value and cost management formulas.

This course can be used in preparation for the Certified Associate in Project
Management exam, and materials from this course are aligned with the
seventh edition of the PMBOK.

2. Video: Communication Formulas (it_capm7_25_enus_02)

During this video, you will learn how to calculate communications channels.

 calculate communications channels

[Video description begins] Topic title: Communication Formulas. Presented

by: Sven Batalla. Materials in this course are based upon the text. A Guide to
the Project Management Body of Knowledge (PMBOK® Guide) Seventh
Edition, Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM,
are registered trademarks of the Project Management Institute, Inc. [Video
description ends]

In the world of project management, successful communication is the

cornerstone upon which all other project elements stand. It’s the vital

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 conduit through which information flows, decisions are made, and actions are
taken.

To navigate that complex web of communication within a project, it’s really

important to understand the concept of communication channels.

The very essence of communication lies in its purpose, delivering information

to those who need it.

Now, in a project, this question is central because it helps identify the target
audience for each piece of information.

Identifying the recipients of the information is like addressing an envelope

with a clear destination. It ensures that the message is received by those for
whom it's intended.

Now, in project management, requirements are the guiding star. They define
what needs to be done, why it needs to be done, and even how it should be
done. Clear and effective communication is really important to convey these
requirements accurately.

Just like a skilled craftsman requires the right tools to complete a project,
clear communication ensures that the right information reaches the right
people, thereby aligning everyone with the project's requirements.

Before constructing a bridge, engineers carefully examine the landscape,

taking into account things like terrain, water bodies, and traffic flow.

Likewise, in project management, identifying communication demand is the

foundation upon which effective communication strategies are going to be
built.

Every project has a unique structure. Some are hierarchical with clear
reporting lines resembling a pyramid, while others have a more matrix-like
structure where individuals may report to multiple people.

Recognizing and understanding this structure is really important because it

determines how information should flow within the project. For example, in a
hierarchical structure, communication often flows in a top-down or down-top
approach, whereas in a matrix structure, it may be multidirectional.

Organizational charts or org charts are visual representations of a project

structure. They provide insight into who reports to whom and the overall
hierarchy. Studying these charts helps project managers to identify the key
people and authorities within the project.

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 Think of org charts as maps that show the lay of the land, allowing project
managers and even the teams to navigate the terrain of communication
more effectively.

A project rarely operates in isolation. It interacts with various stakeholders,

both internal and external. Identifying all of these parties is important in
understanding the broader communication landscape.

So, for example, in a construction project, internal stakeholders may include

the project team, while external stakeholders could be regulatory bodies,
suppliers, or the local community.

Recognizing these parties is like identifying all of the actors in a play. Each
has a role to play, and understanding their involvement is key to successful
communication.

Not all stakeholders are going to be equal though, and not all communication
with stakeholders is the same. Understanding the relationship between
stakeholders is important.

For example, some stakeholders might have a hierarchical relationship where

one reports to another, and others might have a more consultative
relationship where decisions are made jointly. Recognizing these dynamics
helps project managers to tailor their communication approaches.

Think of this as understanding the dynamics between the characters in our

aforementioned play. It influences how they’re going to interact with each
other and how they’re going to communicate.

Within the project team, each member has a unique role and responsibility.
Recognizing these roles is important because it determines what information
they're going to require.

For example, a project manager needs information on project progress to

make decisions, while a software developer needs information on coding
standards.

Understanding these roles and their information needs ensures that the right
data reaches the right team members and, therefore, optimizes efficiency.

Beyond the project team, there are various stakeholders, each with interests
and concerns. Recognizing the different types of information that
stakeholders need ensures that communication is targeted and relevant to
their particular interests.

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 For example, investors may be primarily interested in financial updates,
while environmental regulators are going to focus on compliance data.
Basically, by identifying these information needs, project managers can tailor
their communication to satisfy the specific stakeholder’s interests.

Now, just like blueprints provide detailed specifications for constructing a

building, projects require specific information to guide their execution.

These information requirements encompass details, specifications, and data

necessary to achieve project objectives. Clearly defining these requirements
ensures that the right data is communicated to the right audience at the
right time, which prevents ambiguities and misunderstandings.

In the world of project management, numbers often are how you tell the
story. One critical number is the calculation of communication channels.

So consider the formula we have on the screen, N(N - 1)/2. Now, this is a
simple yet powerful tool for determining the number of communication
channels within a project. N represents the number of stakeholders or team
members that are involved in the project. And this formula’s elegance lies in
the ability to assess the complexity of communication within a project.

So as N grows, meaning the number of stakeholders or team members, then

the number of communication channels is going to increase exponentially.

Imagine it as the number of potential conversations in a crowded room. It

increases with each new person that you put into that room.

Finally, navigating the web of communication channels in project

management requires attention to several key factors.

For example, the size of the project team directly impacts the number of
potential communication channels as we just explored. A larger team means
more individuals who need to communicate with each other.

Managing communication in a large team can be like orchestrating a

symphony. It requires careful coordination to ensure that everyone is in
harmony.

And lastly, within the project team, members possess various skillsets and
expertise. So recognizing these skills is really important because it influences
who should be involved in specific communication channels.

Just as an orchestra would assign different instruments to musicians based

on their expertise. So, project managers should also assign communication

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 responsibilities to team members based on their skills to ensure effective
communication.

Ultimately, effective communication within a project relies on recognizing

who needs information understanding the project structure, identifying
communication demand, quantifying communication channels, and
considering key factors like we just went over.

So, addressing these aspects means that project managers can establish
efficient communication channels that ultimately contribute to project
success.

3. Video: Estimation Formulas (it_capm7_25_enus_03)

After completing this video, you will be able to distinguish between key
estimation formulas.

 distinguish between key estimation formulas

[Video description begins] Topic title: Estimation Formulas. Presented by:

Sven Batalla. Materials in this course are based upon the text. A Guide to the
Project Management Body of Knowledge (PMBOK® Guide) Seventh Edition,
Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM, are
registered trademarks of the Project Management Institute, Inc. [Video
description ends]

PERT, which stands for Program Evaluation and Review Technique, is a

powerful tool used in project management for estimating the expected time
needed to complete a task or project.

Consider the formula on the screen. [Video description begins] The title of
the page reads: PERT Estimation. The formula displayed on it reads:
O+4M+P/6 [Video description ends] This formula represents a weighted
average estimation.

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 O stands for the optimistic estimate, which is the best-case scenario. M
represents the most likely estimate, which is the expected time frame under
normal conditions. And P stands for the pessimistic estimate, which is the
worst-case scenario.

By calculating this weighted average, project managers can obtain a more

realistic estimate that considers both optimistic and pessimistic scenarios,
which theoretically, enhances project planning and risk management.

Effective communication is fundamental to project management, and

understanding the number of communication channels helps in managing
this really vital aspect quite efficiently.

Now, let’s take a look at the formula on the screen. [Video description
begins] The title of the page reads: Number of Communication Channels.
The formula displayed on it reads: n(n - 1)/2 [Video description ends] You
might recognize it from our previous topic. This formula is used to calculate
the number of potential communication channels in a project.

N represents the number of stakeholders or team members that are involved

in the project. The formula considers that each individual could potentially
communicate with every other individual except for themselves. It reveals
that the exponential growth in communication channels as the number of
team members increases highlights the need for structured communication
to prevent chaos and ensure effective communication flow.

Project managers often need to assess the potential monetary value of

different project outcomes to make informed decisions.

Now, in this formula, EMV stands for earned monetary value. It represents
the expected monetary value of a particular project outcome.

To calculate it, you multiply the probability of that outcome occurring by its
impact. [Video description begins] The title of the page reads: Earned
Monetary Value (EMV). The formula displayed on it reads: EMV =
(Probability) x (Impact) [Video description ends] This calculation allows
project managers to assess the financial implications of various scenarios
and make decisions that are financially sound.

Standard deviation is a statistical measure used in project management to

understand the variability or dispersion of data points within a dataset.

So consider the formula we have on the screen. [Video description

begins] The title of the page reads: Standard Deviation. The formula

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 displayed on it reads: P - O/6 [Video description ends] In this formula, P
stands for the pessimistic estimate and O represents the optimistic estimate.
This formula calculates the standard deviation of a task's duration estimate.

Basically, it quantifies the level of uncertainty associated with the estimate.

A higher standard deviation indicates greater uncertainty, helping project
managers to identify tasks that might require more attention due to their
potential impact on project timelines and budgets.

Basically, if your pessimistic and optimistic estimates are really far apart, it
suggests that you don’t fully understand what your real estimate is.

Understanding float, also known as slack, is really important for project

scheduling too. Float represents the amount of time that a task can be
delayed without actually delaying the project’s overall completion.

So, let’s take a look at the two formulas that we have on the screen. [Video
description begins] The title of the page reads: Float/Slack Calculation. The
first formula on the screen reads: Float = LS - ES, LS = Late start, ES = Early
start. The second formula reads: Float = LF - EF, LF = Late finish, EF = Early
finish [Video description ends] These equations help project managers to
calculate float, and again, float can mean slack.

The first equation calculates the float based on the start times of a task,
while the second formula uses the finish times.

Basically, by determining float or slack, project managers can identify tasks

that have some flexibility in their schedules and those that are actually
critical to the project’s timeline. And that allows them to plan or make
decisions based on each task.

And finally, earned value management, or EVM, is a comprehensive

approach to project performance measurement and forecasting, and it
involves lots of different important formulas.

On the screen are some of the key components of EVM. Earned value
represents the value of work performed up to a specific point in time.

Planned value is the authorized budget assigned to the work that's planned.

Schedule variance measures whether the project is ahead or behind

schedule.

Cost variance indicates whether the project is under or over budget, which
can be super important to some project managers.

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 Estimate to completion forecast the expected total cost of the project.

Estimates at completion predict the total cost when the project is completed.

Variance at completion reveals the project cost overrun or underrun at the

project’s end.

Cost performance index assesses cost efficiency.

Schedule performance index evaluates schedule efficiency, and the to-be-

completed performance index estimates the future efficiency needed to
achieve project goals.

Ultimately, these formulae are fundamental for monitoring project progress,

cost control, and performance forecasting in project management.

At the end of the day, these key project management calculations that we
talked about in this topic are essential tools for project managers to
estimate, analyze, and even control various aspects of their project from
time and cost to risk and performance.

Understanding and applying these calculations empowers project managers

to make informed decisions, manage resources effectively, and ensure the
successful execution of their projects.

4. Video: Critical Path Analysis (it_capm7_25_enus_04)

Upon completion of this video, you will be able to recall critical path analysis
formulas.

 recall critical path analysis formulas

[Video description begins] Topic title: Critical Path Analysis. Presented by:
Sven Batalla. Materials in this course are based upon the text. A Guide to the
Project Management Body of Knowledge (PMBOK® Guide) Seventh Edition,
Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM, are

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 registered trademarks of the Project Management Institute, Inc. [Video
description ends]

In project management, the critical path is the longest sequence of tasks in a

project that must be completed for the project to finish on time.

It’s a fundamental concept in project management, often analyzed using the

critical path method or CPM.

CPM is a technique used to identify, sequence, and schedule tasks in a

project. It calculates the earliest and latest start and finish times for each
task, highlighting the path that determines the project's overall duration.

The CPM is a project management technique that’s used to create a project

schedule. It involves identifying the sequence of tasks, dependencies
between the tasks, and creating a network diagram.

A project schedule is a detailed timeline that outlines when each task in a

project will start and finish. And it’s a critical tool for project managers to
ensure tasks are completed on time.

A sequence of tasks is the order in which tasks need to be executed in a

project to achieve the desired outcome. This sequence is essential for
understanding the flow of work in your project.

And a network diagram is a visual representation of the project’s tasks and

their interdependencies. It provides a clear picture of the project structure
and helps in identifying the critical path.

The CPM is super important in project management for lots of different

reasons.

First, it provides accurate estimating. CPM allows for precise estimation of

task durations and project timelines, which helps project managers to plan
effectively.

Next, it identifies dependencies, risks, and constraints.

In fact, by analyzing task dependencies, CPM helps in recognizing potential

bottlenecks, risks, and constraints that can impact the project schedule.

It also identifies key tasks. The CPM highlights critical tasks that have the
most significant impact on project duration. These tasks require special
attention to ensure that the project stays on track.

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 The CPM even assists in task prioritization. Knowing the critical path helps
project managers to prioritize tasks and allocate resources efficiently.

Next, the CPM helps with progress monitoring. CPM provides a baseline for
monitoring project progress. Deviations from the critical path can be quickly
identified and addressed.

And one more important aspect of the CPM is that it helps measure variances
in schedules. In fact, by comparing planned schedules with actual progress,
CPM allows for the measurement of schedule variances and the adjustment
of plans as needed.

Now, the CPM also offers several advantages in project management as well.

For example, it can provide accurate estimates, as I said before. The CPM
provides precise estimates of task durations and the overall project timeline,
which thereby reduces the likelihood of delays.

The CPM is also very useful for determining time per task. It helps project
managers to understand how long each task will take to complete and
facilitate resource allocation as a result.

And on top of that, the CPM can identify key activities. CPM highlights critical
activities that require special attention, which ensures that the project
managers focused on what matters most.

Wait, there’s more!

The CPM identifies task dependencies too, and that helps project managers
to understand the relationships between tasks and the impact of delays on
the project. So if this one task takes a little bit longer than what was
anticipated, we know that the tasks that are associated or dependent on it
are also going to be delayed as a result.

Also, by recognizing the critical path, project managers can prioritize tasks
effectively, ensuring that the project stays on schedule.

And lastly, probably one of the biggest advantages of the CPM, is that it can
help create realistic schedules. The CPM assists in creating realistic project
schedules based on task dependencies and accurate time estimates.

All right! So, when exactly should you use a CPM? The CPM is typically used
early in a project, and that's important.

You’re going to want to know your critical path as early in the project as
possible so that you can plan for it.

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 Now, what that means is that the CPM is typically created and evaluated
during the planning phase. It’s crucial to establish the project’s timeline,
dependencies, and critical tasks as early as possible to ensure a smooth
project execution.

And finally, to measure the critical path using CPM, two important techniques
are employed.

First is what’s called forward pass. This technique calculates the earliest start
and finish times for each task in the project. It helps to determine the earliest
possible project completion date.

And second is the opposite, reverse pass. The reverse pass calculates the
latest start and finish times for each task, working backward from the
project’s end date. And it identifies the latest possible start times for each
task without delaying the project.

Ultimately, the critical path method, or CPM, is a really important tool in

project management for creating accurate schedules, identifying
dependencies, and ensuring projects are completed on time.

Understanding the critical path and employing CPM techniques, like forward
and reverse pass, are really important for successful project planning and
successful execution.

5. Video: Earned Value Analysis (EVA) (it_capm7_25_enus_05)

In this video, discover how to perform earned value analysis.

 perform earned value analysis

[Video description begins] Topic title: Earned Value Analysis (EVA). Presented
by: Sven Batalla. Materials in this course are based upon the text. A Guide to
the Project Management Body of Knowledge (PMBOK® Guide) Seventh
Edition, Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM,

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 are registered trademarks of the Project Management Institute, Inc. [Video
description ends]

Earned value analysis, or EVA, is a project management technique used to

measure the actual work performed on a project and forecast its cost and
completion date. It allows project managers to assess the project’s progress,
and more accurately, by comparing planned and earned values.

EVA provides a method for quantifying the work that’s been completed,
giving project managers a clear picture of how the project is progressing.
Basically, by analyzing earned value and comparing it to planned values, EVA
helps project managers to predict whether the project will be completed
within budget and on schedule or not.

In EVA, there is a couple of key terms and concepts that are worth knowing.

First is budgeted cost of work performed or BCWP. BCWP represents the

budgeted cost of all work completed to date. It’s a crucial metric for
understanding how project costs align with the planned budget.

Next is burn rates. Now, burn rates indicate just how quickly a project is
spending its budget. They are calculated by dividing BCWP by actual costs
and are used to assess cost performance.

EVA revolves around three fundamental concepts.

First is where we were. Now, this refers to the project's baseline or initial
plan. It sets the expectations for cost and schedule at the beginning of the
project.

After where we were, there’s where we are, and this is the current state of
the project. It reflects the actual work completed and the actual costs
incurred up to the present moment.

And if we know where we were and where we are, then, naturally, the third
one is where we’re going to be. Now, this is a projection of the project’s
future based on its current performance. It helps project managers to
anticipate potential issues and plan accordingly.

To effectively implement EVA, certain project management documents are

going to be important.

First, and probably unsurprisingly, we’ll need a project plan. The project plan
outlines the project scope, objectives, schedule, and budget. It serves as a
reference point for measuring performance against the plan.

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 Now, on a similar note, another important document is the scope statement.
The scope statement defines the project's boundaries and deliverables. It’s
really important for understanding what work is actually included in the
project.

A work breakdown structure or WBS, is a hierarchical breakdown of a project

into smaller, manageable components.

It organizes the project scope into deliverable focused levels, making it

easier to plan and track progress.

The WBS breaks down the project, as I said, into deliverables and sub-
deliverables, creating a clear hierarchy that helps in organizing and tracking
work.

So one way to look at it, as I said, is that it’s a delivery focused hierarchy.

The WBS is instrumental in defining the scope of the project by breaking it

down into those manageable work packages. And ultimately, that makes it
easier to assign responsibilities and track progress.

Now, EVA relies on a specific set of data sources to calculate and analyze
performance.

Planned value known as budgeted cost of work scheduled or BCWS,

represents the value of work that was planned to be completed up to a
specific point in time. It serves as a reference point for measuring progress.

Actual costs are the real expenses incurred during the project. They are
essential for calculating cost variances and performance indexes.

And earned value is the value of work that has been completed and verified.
It's a critical metric for assessing the project's progress.

And finally, earned value management, or EVM, involves several key

concepts that are worth noting.

Schedule variance, or SV, measures the difference between the earned

value, or EV, and the planned value, PV, for work performed. It indicates
whether the project is ahead of or behind schedule.

Variance analysis involves examining the differences between planned and

actual values to understand the reasons for any deviations and then take
corrective actions.

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 Cost variance or CV measures the differences between the EV, which
remember, stands for earned value, and the actual costs or AC. It shows
whether the project is under or over budget.

Performance indices are metrics that are used to assess project performance.

And SPI measures the efficiency of time utilization on the project. SPI stands
for schedule performance index. So an SPI that’s greater than one indicates
efficient time management, while an SPI that’s less than one suggests some
inefficiencies.

And lastly, CPI, which stands for cost performance index, measures the
efficiency of cost utilization on the project. A CPI that's greater than one
indicates really good cost efficiency, while a CPI that's less than one suggests
perhaps some cost overruns.

Ultimately, earned value analysis, or EVA, is a powerful project management

technique that uses key metrics like BCWP, burn rates, planned value, actual
costs, and more to calculate project performance.

Understanding the EVA’s core concepts and some key performance

indicators is really important for effective project monitoring and control.

6. Video: Cost Management Formulas (it_capm7_25_enus_06)

After completing this video, you will be able to identify cost management
formulas.

 identify cost management formulas

[Video description begins] Topic title: Cost Management Formulas. Presented

by: Sven Batalla. Materials in this course are based upon the text. A Guide to
the Project Management Body of Knowledge (PMBOK® Guide) Seventh
Edition, Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM,
are registered trademarks of the Project Management Institute, Inc. [Video
description ends]

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 Schedule variance or SV is a crucial metric used in project management to
measure the variance between the earned value or EV and the planned value
or PV. SV provides insight into whether a project is ahead of or behind
schedule.

So let's consider the formula on the screen. [Video description begins] The
title of the page reads: Schedule Variance. The formula displayed on it reads:
Earned Value (EV) - Planned Value (PV) [Video description ends] EV
represents the value of the work that has been completed and verified at a
specific point in time. It reflects the actual progress of the project.

PV, which can sometimes be known as the budgeted cost of work scheduled
or BCWS, is the planned or budgeted cost of the work that has been
scheduled to be completed up to that same point. It represents what was
originally intended in the project plan.

So, the formula SV = EV - PV calculates the schedule variance. If SV is

positive, it indicates that the project is ahead of schedule, while a negative
SV suggests that the project is behind schedule.

Cost variance or CV is a fundamental project management metric that

measures the difference between the earned value or EV and the actual cost
or AC.

CV provides insight into whether the project is under or over budget. AC

represents the actual cost incurred in completing the work up to a specific
point in time. It reflects the real expenses that are associated with the
project. And we already talked about EV previously.

So, the formula CV = EV - AC calculates the cost variance. If CV is positive, it

indicates that the project is under budget, while a negative CV suggests that
the project is over budget.

Next, we have cost performance index or CPI. Now, CPI is a valuable metric
for assessing the efficiency of cost utilization in a project. It's calculated by
dividing the earned value or EV by the actual cost or AC.

So, CPI = EV / AC. A CPI that's greater than one indicates that the project is
using its budget efficiently, meaning it's delivering value for each dollar that
is spent.

Now, conversely, a CPI that is less than one suggests that the project is
overspending relative to the value of work completed. CPI is a vital indicator
for project managers to manage cost effectively.

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 Similarly, we have the schedule performance index or SPI. SPI is another key
metric that's used to assess the efficiency of time utilization in a project. It's
calculated by dividing that earned value by the planned value.

So, SPI = EV / PV. An SPI that's greater than one indicates that the project is
ahead of schedule, meaning it is completing work faster than initially
planned. Conversely, an SPI that’s less than one suggests that the project is
actually behind schedule.

SPI helps project managers to monitor and adjust schedules to keep projects
on track.

Estimate at completion or EAC is a projection of the total cost of a project

when it’s completed. It helps in forecasting whether the project will be
completed under or over budget.

The formula for calculating EAC when there’s been some variance is EAC =
AC + (BAC - EV). So, AC again stands for actual cost. This represents the
actual expenses that are incurred on the project up to the current point.

Meanwhile, BAC, which stands for budget at completion, is the original

budget or planned total cost of the project. And remember that EV is earned
value. EV is the value of work completed and verified up to the current point.

So, the EAC formula takes into account both the actual costs incurred and
the variance between the budgeted cost and the earned value. And it’s
particularly useful when the project has experienced cost or schedule
variances.

Now, in cases where the original project estimates were flawed, a more
accurate EAC can be calculated using the formula, EAC = AC + Bottom-up
ETC.

So, AC is still the actual cost. This represents the actual expenses incurred on
the project up to the current point.

But let’s look at that bottom-up ETC. Bottom-up ETC, and ETC stands for
estimate to complete, is a new estimate of the remaining work's cost
calculated based on a more detailed assessment of the remaining tasks. And
it’s used to correct for the flaws in the original estimate.

This formula acknowledges that the initial estimate may not have been
accurate and provides a more reliable EAC based on the current
understanding of the project’s remaining work.

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 In situations where the original estimate doesn’t suggest any significant
deviation from the plan, however, an EAC can be calculated using the
formula EAC = BAC / Cumulative CPI.

And again, remember, BAC stands for budget at completion. So BAC is the
original budget or planned total cost of the project. Cumulative CPI, and CPI
stands for cost performance index, represents the efficiency of cost
utilization across the entire project.

So, this formula assumes that the current cost performance or CPI will
continue throughout the rest of the project. And this is suitable when there’s
confidence that the project’s cost performance will remain consistent.

Now, when the current cost and schedule performance are considered typical
and there is no significant deviations expected in the future, then the EAC
can be calculated using the formula, EAC = AC + [(BAC – EV) / (Cumulative
CPI, which is multiplied by the Cumulative SPI)].

AC, which again stands for actual cost, represents the actual expenses
incurred on the project up to that current point. And the BAC again is that
original budget or planned total cost of the project and EV, the earned value,
is the value of work completed and verified up to the current point.

And the cumulative CPI, and remember that CPI stands for cost performance
index, represents the efficiency of cost utilization across the entire project.

And the cumulative SPI, where SPI stands for schedule performance index,
represents the efficiency of time utilization across the entire project.

This formula takes into account both cost and schedule performance metrics,
providing a comprehensive view of the project’s EAC under typical
conditions.

So at the end of the day, these various project management calculations and
metrics which include schedule variance, cost variance, cost performance
index, schedule performance index, and various methods to calculate EAC,
play a really important role in tracking and controlling project performance.

They help project managers to make informed decisions, assess deviations

from the original plan, and ensure that projects are completed successfully
within budget and on schedule, ultimately leading to project success.

7. Video: Course Summary (it_capm7_25_enus_07)

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 In this video, we will summarize the key concepts covered in this course.

 summarize the key concepts covered in this course

[Video description begins] Topic title: Course Summary. Presented by: Sven
Batalla. Materials in this course are based upon the text. A Guide to the
Project Management Body of Knowledge (PMBOK® Guide) Seventh Edition,
Project Management Institute Inc., 2022. PMBOK, PMI, PMP, CAPM, are
registered trademarks of the Project Management Institute, Inc. [Video
description ends]

So in this course, we’ve examined key project management calculations and

formulas.

We did this by exploring calculating communication formulas, key estimation

formulas, and critical path analysis formulas, and performing earned value
analysis and cost management formulas.

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