Estimate at Completion & Estimate to Complete
Definition:
Estimate at Completion (EAC)
Estimate at completion is the forecasted cost of the project, as the project progresses. There are a number of different ways to determine the EAC.
Estimate to Complete (ETC)
Estimate to complete (ETC) is a forecast of how much more money will need to be spent to complete the project.
—————-In my example I will also use BAC, CPI, EV and AC.
So let’s see their definition as mentioned below——————————————
Budget at Completion (BAC)
Budget at completion (BAC) is the total anticipated and budgeted spending for the project based on the project estimates and assumptions.
Cost Performance Indicator (CPI)
Cost Performance Indicator is an index showing the efficiency of the utilization of the resources on the project.
Earn Value (EV)
The Earned Value (EV) comes from an assessment by the project management team as to the amount of progress they have made on each task in the project. Tasks that are completed have earned the entire value for that task.
Actual Cost (AC)
Actual Cost (AC) is the number that finance often is most concerned about because this represents the actual cash that the business has had to expend on the project
—————————————————————————————————–
Formulas:
| CPI | CPI = Earned Value (EV) /Actual Cost (AC) |
| EV | EV = Cost performance index (CPI) * actual costs (AC) |
| EAC | If problem solved in project which is not going to occur again. EAC = actual costs (AC) + budget at completion (BAC) – earned value (EV) |
| EAC | If developer or worker performance is slow then will still happen EAC = budget at completion (BAC) Г· cost performance index (CPI) |
| ETC | ETC = estimate at completion (EAC) – actual costs (AC) |
Example:
Let’s take below problem
| Management Term | Usual Term | For Example given value |
|---|---|---|
| BAC | Original Budget | $2000.00 |
| CPI | Cost Performance Index | 0.9 |
| AC | Actual Cost | $1000.00 |
| Find Earn value (EV), Forecast (Estimate at completion) (EAC), Estimate to complete (ETC)? | ||
For this above problem there are 2 solutions. Please see below:
| If CPI less since There is infra problem which is now recovered and it wont happen again | ||||
| Original Budget | BAC | . | $2000.00 | Given in question |
| Cost Performance | CPI | . | 0.9 | Given in question |
| Actual Cost | AC | . | $1000.00 | Given in question |
| Earn Value | EV | EV = Cost performance index (CPI) * actual costs (AC) | 0.9 * 1000 = 900 | |
| Forecast | EAC | EAC = actual costs (AC) + budget at completion (BAC) – earned value (EV) | 1000 + 2000 – 900 = 2100 | |
| Estimate To Complete | ETC | ETC = estimate at completion (EAC) – actual costs (AC) | 2100 – 1000 = 1100 | |
| . | ||||
| If CPI less since There is developer or worker poor performance then it will happen through out project | ||||
| Forecast | EAC | EAC = budget at completion (BAC) Г· cost performance index (CPI) | 2000 / 0.9 = 2222 | |
| Estimate To Complete | ETC | ETC = estimate at completion (EAC) – actual costs (AC) | 2222 – 1000 = 1222 | |
Thanks!
Avinash
August 11, 2013
В· 
Infoyen В· 
No Comments
Posted in: General, Project Management
Leave a Reply