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PMP / PgMP MATHEMATICAL FORMULAES

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PMP / PgMP MATHEMATICAL FORMULAES
GUIDE TO PMP/PGMP EXAM PREPARATION FORMULAE

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PMP / PgMP MATHEMATICAL FORMULAES
ABOUT THE DOCUMENT

Version v01
Jitesh Goswami
Author
PgMP, MSP, PMP, PRINCE2
Date 6th June, 2014

Loca1on h?ps://www.pmcerty.com/index.php?pid=cms&slug=freeresource

This document can help PMP and PgMP aspirants & professionals to learn and study required mathemaPcal formulae
Purpose
that can help answering those relevant exam quesPons & their applicaPon to real life project / program scenarios

Understand the input variables of each formulae and in what project / program situaPons what input values may
Usage emerge. Apply dierent values of input variables and see the eect on formulae output. Also understand the meaning of
dierent formulae output values and its consequence to the Project / Program management pracPse.
Spending few minutes understanding the formulae in detail will help answer those quesPons in exam accurately. These
Benet
formulae can also help beyond the PMP / PgMP ExaminaPon and to the real life project / program situaPons.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMNET BASIC TERMS

EV = Earned Value
PV = Planned Value
AC = Actual Cost
CV = Cost Variance
CPI = Cost Performance Index
SV = Schedule Variance
SPI = Schedule Performance Index
ETC = Es1mate to Complete
EAC = Es1mate at Comple1on
VAC = Variance at Comple1on
BAC = Budget at Comple1on
TCPI = To Complete Performance Index

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT BASIC TERMS

Earned Value on a reporPng date is budgeted cost of work performed. To nd out Earned
value manually, you nd out from your program acPviPes that what components and
EV = Earned Value
program acPviPes have been completed already. Then you sum up all the budgeted costs
for those acPviPes and that is your earned value.

Planned Value on a reporPng date is the budgeted cost of the work scheduled. To nd out
planned value manually, you can open your program schedule and look at relevant
PV = Planned Value
reporPng date. This will give you list of acPviPes you should have completed by that date.
Sum up all the costs budgeted for all those acPviPes and that is your planned value.

Actual Cost on a reporPng date is the Actual costs incurred by the program Pll that date.
AC = Actual Cost
Doesnt ma?er what acPviPes are performed.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT COST

PosiPve value of Cost variance indicates that project/program is


Cost Variance: CV = EV - AC under budget. And negaPve value of cost variance indicates that
project/program is over budget.

Cost performance index indicates how eciently program


resources are being used. Lets say value is 1.1. That means that
project/program is ge]ng $1.1 of work performed from every $1
Cost Performance Index: CPI = EV / AC spent. Cost performance index value above one indicates that
project/programs eciency in using resources is good. And value
under one indicates that programs eciency in using resources is
not so good.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT - SCHEDULE

PosiPve value of Schedule variance indicates that project/


program is ahead of schedule. And NegaPve value of Schedule
Schedule Variance: SV = EV - PV
variance indicates that project/program is behind the
schedule.

Schedule performance index indicates the eciency of the


Pme used. Lets say value is 0.9. That means project/program
is progressing 90% of the rate originally planned. Schedule
Schedule Performance Index: SPI = EV / PV Performance index value above one indicates that project/
program is very ecient in using Pme. And value under one
indicates that program is less ecient in using Pme. Hence, an
SPI of >1 is good, <1 is bad.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS - ETC

EsPmate To Complete is that monetary value which is expected


to be spent on the underlying project / program to complete
remaining work. When project / program is running as planned
ETC = Es1mate To Complete = EAC - AC
with valid earned value performance and no current or expected
deviaPons exist, then EsPmate To Complete is calculated with
this formulae

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS - ETC

EsPmate to Complete is that monetary value which is expected to


be spent on the underlying project / program to complete
remaining work. Use this formulae when current earned value
measurements are not representaPve of the future values. For
ETC = Es1mate To Complete = BAC - EV
example, some issues were encountered which reected in poor
current performance, but have been xed and overall project /
program budget at complePon is thought to be valid with current
Earned Value (EV).

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS - ETC

EsPmate to Complete is that monetary value which is


expected to be spent on the underlying project / program
to complete remaining work. Use this formulae when
current earned value measurements have deviated from
the planned performance and it is thought to conPnue in
ETC = Es1mate To Complete = (BAC - EV) / CPI
future. For example, some issues were encountered
which reected in poor (or be?er) current performance,
and overall current forecasted project / program budget
at complePon may change based on new cost
performance index.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS EAC

EsPmate At ComplePon is the latest esPmate of


monetary value which is expected to have been spent
at the complePon of the project / program. Use this
EAC = Es1mate At Comple1on = BAC / CPI
formulae when current CPI is within expected limits
without unwanted deviaPons and is expected to
conPnue in future.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS EAC

EsPmate At ComplePon is the latest esPmate of


monetary value which is expected to have been spent
at complePon of the project / program. Use this
formulae when original EAC can no longer hold true
due to changed condiPons on the way Pll now. Hence,
EAC = Es1mate At Comple1on = AC + ETC
Actual Cost incurred so far and latest EsPmate To
Complete are considered to forecast latest EsPmate At
ComplePon. (Original ETC can only be relied upon if
previously forecasted TCPI sPll holds true. Else, a new
ETC must be considered to forecast latest EAC.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS EAC

EsPmate At ComplePon is the latest esPmate of


monetary value which is expected to have been spent
at complePon of the project / program. Use this
EAC = Es1mate At Comple1on = AC + (BAC - EV) formulae when current performance is not going to
conPnue in future. Hence, ETC (i.e. BAC - EV) is
calculated again and added to AC in order to get new
EAC forecast.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS EAC

EsPmate At ComplePon is the latest esPmate


of monetary value which is expected to have
been spent at complePon of the project /
program. Use this formulae when project /
program is found over budget and schedule
EAC = Es1mate At Comple1on = AC + ((BAC-EV)/(CPI*SPI))
baseline should be sPll achieved. Basically
what we are doing is recalculaPng ETC with
help of current CPI & SPI, BAC and EV. This ETC
is simply added to AC to come up with latest
EAC

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS VAC

Variance At ComplePon is the monetary value


reecPng whether project / program is forecasted to
VAC = Variance At Comple1on = BAC - EAC be over budget or under budget at its complePon. In
order to know this, simply EAC is subtracted from
BAC.

PMP / PgMP MATHEMATICAL FORMULAES


EARNED VALUE MANAGEMENT FORECASTS TCPI

To Complete Performance Index is the forecasted cost


TCPI = To Complete Performance Index performance index in order to complete the project /
= (BAC - EV) / (BAC - AC) program sPll within the budget. (Use this formulae if
program is expected to be completed within budget.)

To Complete Performance Index is the forecasted cost


performance index in order to complete the project /
TCPI = To Complete Performance Index program sPll within the latest forecasted esPmate at
= (BAC - EV) / (EAC - AC) complePon. (Use this formulae if project / program is
expected to be completed within latest forecasted
EsPmated At ComplePon.)

PMP / PgMP MATHEMATICAL FORMULAES


QUALITY SIX SIGMA VARIANCE & STANDARD DEVIATION

Variance represents the variability of the


Variane of n numbers = (X1)^2 + (X2)^2 + (X3)^2 +(Xn)^2
numbers around the mean in Squared units.

Standard DeviaPon, shows the variability of


Standard Devia1on = Square Root of Variance numbers around its mean in same units as the
numbers

PMP / PgMP MATHEMATICAL FORMULAES


QUALITY SIX SIGMA

+/- 6 = 99.99%
+/- 3 = 99.73%
+/- 2 = 95.46%
+/- 1 = 68.26%

PMP / PgMP MATHEMATICAL FORMULAES


NETWORK DIAGRAM ACTIVITY ON NODE

This formulae gives the duraPon of the acPvity (in same units
Ac1vity Dura1on = EF - ES + 1 = LF - LS + 1 as of EF, ES, LF and LS. E.g. days or weeks or months.). EF =
Early Finish, ES = Early Start, LF = Late Finish & LS = Late Start.
Total oat represents the Pme that an acPvity can be get
Total Float = LS - ES = LF - EF delayed by, without aecPng project / program's schedule
baseline
EF = ES + Dura1on - 1 Where EF is Early Finish of an acPvity and ES is Early Start.
Where ES is an Early Start of an acPvity and EF is an Early
ES = EF of predecessor + 1
Finish
LF = LS of successor - 1 Where LF is Late Finish of an acPvity and LS is Late Start
LS = LF - Dura1on + 1 Where LS is Late Start of an acPvity and LF is Late Finish

PMP / PgMP MATHEMATICAL FORMULAES


PROJECT / PROGRAM EVALUATION & REVIEW TECHNIQUE - ESTIMATIONS

When it comes to esPmaPng a closest value of a variable (e.g. acPvity


PERT = (P + 4M + O)/6 duraPon etc..), this PERT formulae is widely used. It is also known as 3
point PERT formulae.

PERT = (P - O)/6 Variability of the esPmated value can be calculated with this formulae.

PMP / PgMP MATHEMATICAL FORMULAES


INVESTMENT SELECTION METHODS

Where PV is Present Value, FV is Future Value, 'r' is discount rate


Present Value (PV) = FV / (1+r)^n
and 'n' is number of the periods
Where PV is Present Value, FV is Future Value, 'r' is discount rate
Future Value (FV) = PV * (1+r)^n
and 'n' is number of the periods
NPV > 0 is be?er. Between mulPple projects / programs(or an
iniPaPve) the one with highest NPV is be?er. NPV is calculated
Net Present Value (NPV)
by calculaPng present value of each cash-ow item and then
subtracPng cash ouqlows from cash inows.
IRR is the discount rate when NPV = 0. Hence, higher the IRR the
Internal Rate of Return (IRR)
be?er.
Payback period is the period at which project / program(or an
Payback Period
iniPaPve) will reach breakeven point (i.e. no prot no loss)
Rate Of Return (ROI) = Net Benets/ Costs Higher the ROI the be?er since higher value reects more
= (Gain - Costs) / Costs benets and be?er returns
SomePmes, Cost to Benets RaPo (CBR) = Costs / Benets is also
Benets to Cost Ra1o (BCR) = Benets / Costs used. BCR > 1 and CBR < 1 are be?er. BCR < 1 and CBR > 1 are
not so good.

PMP / PgMP MATHEMATICAL FORMULAES


ESTIMATE RANGES

Rough Order of Magnitude Es1mate -50 to +50% range


Preliminary Es1mate -15 to +50% range
Budget Es1mate -10 to +25% range
Deni1ve Es1mate -5 to +10% range

PMP / PgMP MATHEMATICAL FORMULAES


CENTRAL VALUE AVERAGE, MEDIAN, MODE

If there are 'n' numbers then average of these numbers can be calculated by
Average = (X1 + X2 + X3 + Xn) / n
adding all the numbers and dividing them by 'n'.
If there are 'n' (odd) numbers, then Median of these numbers can be calculated
by arranging all numbers in ascending order and reaching next number to X(n/
Median = X(next number to n/2)
2)th number. E.g. if there are seven numbers 1,3,5,7,9,11,13 then median is
= X1, X2, X3 Xn (n is Odd number)
next number to (7/2 = 3.5 = 3rd). Which is 4th number from either side. In this
example Median is number '7'.
If there are 'n' (even) numbers, then Median of these numbers can be
calculated by arranging all numbers in ascending order and reaching the
Median = X(next number to n/2)
X(n/2)th number. E.g. if there are eight numbers 1,3,5,7,9,11,13,15 then
= X1, X2, X3 Xn (n is Even number)
median is average of (8/2 = 4) 4th number and 5th number. Which is (7+9)/2 =
8. In this example Median is number '8'.
If thre are 'n' numbers, then Mode of those group of numbers is idenPed by
Mode = X(number that occurs most frequently) knowing frequency of each number in that group. E.g. if there are nine numbers
= X1, X2, X3 Xn 1, 3, 5, 7, 9, 11, 3, 13, 3, then Mode of these numbers is '3' since number 3
comes 3 Pmes in group, which is highest

PMP / PgMP MATHEMATICAL FORMULAES


EMV & NUMBER OF COMMUNICATION CHANNELS

Expected Monetory Value (EMV) = Probability * Impact in Currency

If your project / program has total N number of


stakeholders, then total number of
communicaPon channels between these N
number of stakeholders can be mathemaPcally
Number of Communica1on Channels = N * (N-1)/2
calculated by this formulae. By the way, a
communicaPon channel between two
stakeholders is the communicaPon medium
established between those two stakeholders.

PMP / PgMP MATHEMATICAL FORMULAES


"It Is Not Certain That
Everything Is Uncertain.
- by Blaise Pascal

PMP / PgMP MATHEMATICAL FORMULAES

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