A program has a budget at completion of $1,250,000 and has already spent $425,000. The program is running late due to some vendor delays; the program is only 30 percent complete though it was…

The correct answer is C. $991,667. This requires Estimate to Complete (ETC) using Earned Value Management. Step 1 - Calculate Earned Value (EV): EV = BAC × % complete = $1,250,000 × 0.30 = $375,000. Step 2 - Calculate Cost Performance Index (CPI): CPI = EV / AC = $375,000 / $425,000 ≈ 0.8824. Step 3 - Calculate…

Program Life Cycle Management

Question

A program has a budget at completion of $1,250,000 and has already spent $425,000. The program is running late due to some vendor delays; the program is only 30 percent complete though it was scheduled to be 45 percent at this time. Based on this information how much more money will this program need to finish?

Options

A$978,445
B$919,325
C$991,667
D$987,544

How the community answered

(30 responses)

A
13% (4)
B
3% (1)
C
80% (24)
D
3% (1)

Explanation

This requires Estimate to Complete (ETC) using Earned Value Management. Step 1 - Calculate Earned Value (EV): EV = BAC × % complete = $1,250,000 × 0.30 = $375,000. Step 2 - Calculate Cost Performance Index (CPI): CPI = EV / AC = $375,000 / $425,000 ≈ 0.8824. Step 3 - Calculate ETC: ETC = (BAC − EV) / CPI = ($1,250,000 − $375,000) / 0.8824 = $875,000 / 0.8824 ≈ $991,667. Because the program is spending more than it is earning (CPI < 1), it will need more money than the remaining planned budget to finish, which is why the answer ($991,667) exceeds the simple remaining balance of $875,000.

Topics

#Earned Value Management (EVM)#Cost Forecasting#Estimate At Completion (EAC)#Estimate To Complete (ETC)

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