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PMI PMP · 8 Essential Terms
PMP earned-value formulas and the traps in their direction: planned value, earned value, actual cost, CPI, SPI, variances, BAC, and the typical EAC.
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The authorized budget assigned to the work scheduled to be completed as of a status date. PV is the budgeted value of what should have been done.
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The authorized budget assigned to the work scheduled to be completed as of a status date. PV is the budgeted value of what should have been done.
Mnemonic. PV is the plan's price tag for the work that should be finished by today.
Exam trap. PV is not the money you have spent, and it is not the value of work you actually finished. Those are AC and EV.
The budgeted value of the work actually completed as of a status date. EV is measured with the baseline budget, not with the invoices.
Mnemonic. EV is what the finished work was worth in the plan, not what it cost.
Exam trap. Percent complete times BAC, applied carefully to the work package, is the idea. Do not multiply percent complete by actual cost.
The realized cost of the work performed during a period. AC is what you spent, whether or not the spend bought the progress you planned.
Mnemonic. AC is the cash that left, not the progress it bought.
Exam trap. A low AC is not automatically good. Pair it with EV. Cheap and unfinished is a small AC with a smaller EV, which is still a poor CPI if EV is lower.
CPI equals earned value divided by actual cost. A CPI below 1 means you are getting less value than you are spending.
Mnemonic. CPI is EV over AC. Under 1 is over budget.
Exam trap. Inverting the ratio is the classic miss. AC divided by EV is not the CPI. A result of 0.90 is unfavorable.
SPI equals earned value divided by planned value. An SPI below 1 means less work has been accomplished than the plan called for by this date.
Mnemonic. SPI is EV over PV. Under 1 is behind the scheduled work.
Exam trap. SPI is not a measure of whether people are busy. A team can be fully booked and still have an SPI below 1 if the finished scope is short of the plan.
CV equals earned value minus actual cost. A negative CV means the completed work cost more than its budgeted value.
Mnemonic. CV is EV minus AC. Negative means over budget.
Exam trap. The sign is the trap. Teams remember that red is bad and then subtract in the wrong direction. Spent minus earned is not the PMI variance.
BAC is the total approved budget for the work. It is the sum of the planned value for the whole scope and does not change unless the cost baseline changes.
Mnemonic. BAC is the whole approved pie, not the slice you have eaten.
Exam trap. Do not replace BAC with the latest forecast. The forecast is EAC. BAC stays the baseline until a change is approved.
The expected total cost of the project when the defined work is done. If the current CPI is expected to continue, a typical formula is BAC divided by CPI.
Mnemonic. EAC is the new forecast of the whole bill. BAC divided by CPI is the version you use when the past cost rate will continue.
Exam trap. Other formulas exist for other assumptions, including actual cost plus the remaining budget. The trap is using BAC divided by CPI when the stem says the overrun was a one-time event that will not repeat.