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Question:
Write an essay on Earned value for the project using the 50-50 Rule.

 
Answer:
1. Earned value for the project using the 50-50 Rule

The Earned value of a project is the total budgeted costs of the activities involved in the project (Vanhoucke 2013).

 

Budget

Begun?

Complete?

Actual cost

Task A

 $3,100.00

Yes

Yes

 $ 3,100.00

Task B

 $4,000.00

Yes

Yes

 $ 4,500.00

Task C

 $2,500.00

Yes

Yes

 $ 2,250.00

Task D

 $4,000.00

Yes

No

 $ 3,500.00

Task E

 $3,500.00

Yes

Yes

 $ 4,000.00

Task F

 $2,500.00

No

No

 $             -  

 Assumptions of 50-50 method for calculating the Earned Value:

  • EV is 0 before the start of an activity
  • EV is 50% of total activity budget after an activity is started
  • EV is 100% of the budget if the tasks is completed (Gupta 2014)
   

50-50 method

Task A

 

 $        3,100.00

Task B

 

 $        4,000.00

Task C

 

 $        2,500.00

Task D

 

 $        2,000.00

Task E

 

 $        3,500.00

Task F

 

 $                     -  

Earned Value of the project

 $     15,100.00

 2. Earned value for the project using the 0-100 Rule

 

Budget

Begun?

Complete?

Actual cost

Task A

 $3,100.00

Yes

Yes

 $ 3,100.00

Task B

 $4,000.00

Yes

Yes

 $ 4,500.00

Task C

 $2,500.00

Yes

Yes

 $ 2,250.00

Task D

 $4,000.00

Yes

No

 $ 3,500.00

Task E

 $3,500.00

Yes

Yes

 $ 4,000.00

Task F

 $2,500.00

No

No

 $             -  

 Assumptions of 0-100 method for calculating the Earned Value:

  • EV is 0 before the start of an activity
  • EV is 0 if an activity is not completed
  • EV is 100% of the budget if the task is completed (Gupta 2014)
   

0-100 method

Task A

 

 $        3,100.00

Task B

 

 $        4,000.00

Task C

 

 $        2,500.00

Task D

 

 $                    -

Task E

 

 $        3,500.00

Task F

 

 $                     -  

Earned Value of the project

 $     13,100.00

 3. Discrepancy of earned value figures when using the 50-50 Rule and 0-100 Rule
 

50-50 method

0-100 method

Task A

 $        3,100.00

 $        3,100.00

Task B

 $        4,000.00

 $        4,000.00

Task C

 $        2,500.00

 $        2,500.00

Task D

 $        2,000.00

 $                     -  

Task E

 $        3,500.00

 $        3,500.00

Task F

 $                     -  

 $                     -  

Earned Value of the project

 $     15,100.00

 $      13,100.00

 The earned value of a project helps in determining the quantity of tasks being completed to date and the amount of cost having spent for the amount of work (Vanhoucke 2013). From the analysis of the information of the earned values of the project, it can be evident that there is a discrepancy in the values as estimated using two different methods. In comparison with the results obtained by utilizing the two estimation methods, the earned value as calculated using the 50-50 method shows more accurate results. The reason is due to the fact that the 0-100 method does not take any information from the project budget until a particular activity is completed. In other words, the 0-100 method declares the Earned Value of the project to be $ 0 until the entire task is completed. However, the 50-50 method takes 50% of the activity to be completed even after a particular activity has just started.

Thus, in comparison, the 50-50 method helps in providing a closer approximation in reality than the 0-100 method. The main reason is that the 50-50 method declares the earned value of a particular activity to be greater than $ 0 while it is under progress.

4. Schedule Variance (SV) for the project as reported using the 50-50 Rule

Scheduled Variance of a project = =Earned value - Planned value

Planned Value = Total budget costs for the tasks completed so far

 

Budget

Begun?

Complete?

Actual cost

Task A

 $3,100.00

Yes

Yes

 $ 3,100.00

Task B

 $4,000.00

Yes

Yes

 $ 4,500.00

Task C

 $2,500.00

Yes

Yes

 $ 2,250.00

Task D

 $4,000.00

Yes

No

 $ 3,500.00

Task E

 $3,500.00

Yes

Yes

 $ 4,000.00

Task F

 $2,500.00

No

No

 $             -  

Earned value of the project

$ 15,100

Planned value

$ 13,100

 Planned value, PV = $ 13,100

Earned value, EV (using 50-50 method) = $ 15,100

Thus, Schedule Variance, SV = EV-PV= $ 2000

A positive SV represents that the project is ahead of the schedule (Tom and Paul 2013)

5. Schedule Performance Index (SPI)

Scheduled Performance Index= =Earned value /Planned value

 

Budget

Begun?

Complete?

Actual cost

Task A

 $3,100.00

Yes

Yes

 $ 3,100.00

Task B

 $4,000.00

Yes

Yes

 $ 4,500.00

Task C

 $2,500.00

Yes

Yes

 $ 2,250.00

Task D

 $4,000.00

Yes

No

 $ 3,500.00

Task E

 $3,500.00

Yes

Yes

 $ 4,000.00

Task F

 $2,500.00

No

No

 $             -  

Earned value of the project

$ 15,100

Planned value

$ 13,100

 Planned value, PV = $ 13,100

Earned value, EV (using 50-50 method) = $ 15,100

Thus, SPI = ($ 15,100/ $13,100) = 1.15

A positive SPI represents that the project is ahead of the schedule i.e., i.e., the project has achieved more than what is expected (Lipke 2013)

6. Cost Variance (CV) for the project as reported using the 50-50 Rule

 

Budget

Begun?

Complete?

Actual cost

Earned Value (using 50-50 rule

Task A

 $3,100.00

Yes

Yes

 $ 3,100.00

 $3,100.00

Task B

 $4,000.00

Yes

Yes

 $ 4,500.00

 $4,000.00

Task C

 $2,500.00

Yes

Yes

 $ 2,250.00

 $2,500.00

Task D

 $4,000.00

Yes

No

 $ 3,500.00

 $2,000.00

Task E

 $3,500.00

Yes

Yes

 $ 4,000.00

 $3,500.00

Task F

 $2,500.00

No

No

 $             -  

 $            -  

Earned value of the project

$ 15,100

Actual cost

$     18,100.00

Cost Variance = Earned value – Actual cost

Actual cost =Total expenditure for the work so far = $     18,100.00

Thus, Cost Variance, CV for the project = $ 15,100- $ 18,100= (-$ 3,000)

A negative CV represents that the project is over budget (Lipke 2013)

7. Cost Performance Index (CPI)

Cost Performance Index = =Earned value / Actual cost

 

Budget

Begun?

Complete?

Actual cost

Earned Value (using 50-50 rule

Task A

 $3,100.00

Yes

Yes

 $ 3,100.00

 $3,100.00

Task B

 $4,000.00

Yes

Yes

 $ 4,500.00

 $4,000.00

Task C

 $2,500.00

Yes

Yes

 $ 2,250.00

 $2,500.00

Task D

 $4,000.00

Yes

No

 $ 3,500.00

 $2,000.00

Task E

 $3,500.00

Yes

Yes

 $ 4,000.00

 $3,500.00

Task F

 $2,500.00

No

No

 $             -  

 $            -  

Earned value of the project

$ 15,100

Actual cost

$     18,100.00

Thus, Cost Performance Index (CPI) for the project= ($15,100/ $ 18,100) = 0.83

A CPI having value

8. CPI to compute estimate at complete (EAC)

Estimate at Time or, EAC is a way for projecting the planned cost at the completion of the project based on the current data. It shows the variance in the actual final cost and the planned final cost (Caron, Ruggeri and Merli 2013).

EAC= BAC/ CPI (BAC is the total Budget at Completion)

Total budget for the project, (BAC) = $50,000

Thus, EAC for the project = ($50,000/ 0.83) = $     59,933.77

9. Report on the progress of the project

From the earned value information as estimated for the project, it can be evident that the earned value for the project is less than what is expected from the same. This has been due to the fact than the tasks involved in the project are not properly scheduled. Moreover, the actual value of the work being completed in the project is behind its planned value. Moreover, the total tasks being completed in the project is not matching with the total budget of the tasks being estimated.

Summary of the calculations being estimated

Earned value = $ 15,100 (using 50-50 method)

= $ 13,100 (using 0-100 method)

Schedule Variance, SV = $ 2000

Schedule Performance Index, SPI = 1.15

Cost Variance, CV = - ($ 3,000)

Cost Performance Index, CPI = 0.83

Estimate at Completion, EAC = $ 59,933.77 

 
Future projection

From the estimated information about the Schedule Variance (SV) and the Schedule Performance Index (SPI), it can be evident that the project has been ahead of the actual scheduled time and the project has been achieving more than what is expected from the same. However, the information about the Cost Variance (CV) and the Cost Performance Index (CPI) shows that the project has been running on over budget and has been varying in the actual final cost than what is planned final cost for the project. This can be evident from the EAC value for the project. Thus, the managers are required to provide a check on the expenses and reschedule the budget such that extra expenses could be saved. The managers are also required to reschedule the timeline for the project such that to ensure the running of the project within the estimated timeline and budget.  

 
References

Caron, F., Ruggeri, F. and Merli, A., 2013. A Bayesian approach to improve estimate at completion in earned value management. Project Management Journal, 44(1), pp.3-16.

Gupta, R., 2014. Earned Value Management System. International Journal of Emerging Engineering Research and Technology, 2(4), pp.160-165.

Lipke, W., 2013. Earned Schedule–Ten Years After. The Measurable News (3), pp.15-21.

Tom, A.F. and Paul, S., 2013. Project monitoring and control using primavera. International Journal of Innovative Research in Science, Engineering and Technology, 2(3), pp.762-771.

Vanhoucke, M., 2013. The impact of project schedule adherence and rework on the duration forecast accuracy of earned value metrics. Project management: practices, challenges and developments, pp.95-131. 

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