Earned value analysis refers to the process of measuring the progress of a specific project during a period of time. The main analyses from earned value are the cost of the project, the date of completion of the project, and any existing variance that the project may have. To obtain the earned value of a project there has to be planned value, the actual cost of the project, and the total earned value of the project (Fleming& Koppelman, 2016). Planned value is the amount that has been set aside for the project ,actual cost of the project refers to what has gone into the project from the initial date up to the present date of the project while the earned value refers to the budget of the project multiplied by the percentage of the work that has been done.
Scheduled Performance Index (SPI) is the ratio of earned value and planned value, a desirable scheduled performance index should be greater than 1.Scheduled variance, on the other hand, is the difference that exists between earned value and planned value, a desirable scheduled variance is one which is positive in value, that is, above zero. Cost performance index is the ratio that exists between earned value and actual costs, a desired cost performance index is one which is above one. The three are the methods that are used in projects to measure the projects percentage completion. They are, however, connected and related to one another.
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Problem 1
Actual cost=$540,000 Planned Cost=$523,000 Earned Value=$535,000
Schedule variance=$535,000-$523,000
=$12,000
This is a well-scheduled variance since it is greater than 0 and has a positive value.
Cost variance=Earned Value-Actual costs
=$535,000-$540,000
=-$5,000
The cost variance is undesirable since it is less than 0 and has a negative value.
Problem 2
Actual Cost=$34,000 Planned Cost=$42,000 Value=$39,000
Cost variance=$39,000-$34,000
=$5,000
Schedule variance=$39,000-$42,000
=-$3,000
CPI=EV/AC, 39,000/34,000
=1.147, desirable since it is higher than 1, CPI which is higher than 1 is desirable.
SPI=EV/PV, 39,000/42,000
=0.928, Not good since it is less than 1.SPI which is less than 1 is undesirable for projects.
Reference
Fleming, Q. W., & Koppelman, J. M. (2016, December). Earned value project management.
Project Management Institute.
