From the two tables shown above, it can be deduced that the Earned Value Discrepancy is 8,825.
Schedule Variance using 50-50 Rule
Scheduled Variance (SV) is the difference between Planned Value (PV), which is the budgeted value and Earned Value (EV), which is the actual value of the work at the specific time. This factor determines whether the project work is ahead of, or on or behind the schedule. In this case study SV = EV – PV = 4,275 – 11,050 = -6,775. As the result is negative, the project work is behind schedule, (Baker & Riddick, 2013).
Schedule Performance Index (SPI)
This factor, which is the ratio between EV and PV, is used to determine if the project work is ahead of or on or behind schedule in relative terms. In this case study, SPI = EV / PV = 4,275 / 11,050 = 0.38. As the result is less than 1, it reflects that the project work is behind schedule, (Baker & Riddick, 2013).
Cost Variance (CV) using 50-50 Rule
This factor, which is the difference between PV and AC (the Actual Cost), is used to determine whether the project work is under or on or over budget. In this case study,
CV = EV – AC = 13,100 – 19,600 = - 6,500. As the result is negative, it shows that the project is behind schedule, (Mudra, 2014).
Cost Performance Index (CPI)
This factor, which is the ratio between EV and AC, is used to determine if the project work is ahead of or on or behind schedule in relative terms. In this case study, CPI = EV / AC = 13,100 / 19,600 = 0.67. As the result is less than 1, it reflects that the project work is behind schedule, (Baker & Riddick, 2013).
Estimate at Completion (EAC)
As the project progresses, there can be variations which occur into the final Budgeted Actual Cost (BAC) as compared to the planned final cost. This factor is used to determine the ratio of the project / estimate values of the planned cost of the project at the project’s finish with the currently available data of the project. This factor can be determined by using the following formula to calculate EAC, which is based on the information and conditions given in the case study: EAC = BAC / CPI = 17,350 / 0.67 = 25,895.
A Brief Status Report based on Table – 01
From the results obtained for the project which have been based on various factors used for calculating the values, it has been observed that the project is under-performing. In fact, all the results show that the project is behind schedule and may eventually prove to be costly for the management, (Mudra, 2014). But I have another fact to bring to the notice of the management and that concerns with the authenticity of these results. Experts have opined in many instances that the results obtained by using these factors are only indicative and should not be considered as final verdicts on the outcome of the project. It is therefore essential for the management to arrive at a conclusion only after all the tasks have been completed and then arrive at the correct conclusion. In this respect, the management should look at the projected values shown in Table-4. These values show that the project is right on schedule and cannot be considered as a loss making project, (Mudra, 2014).
List of References
Baker, H.K. and Riddick, L.A. (2013) International Finance: A Survey. Oxford: OUP USA.
Mudra, J. (2014) International Financial Management (12th ed). Stamford, CT: Cengage Learning.