A project manager is reviewing the performance of a $500,000 project. The plan was to have 50% of the work completed by this point. A recent assessment shows that only 40% of the work is actually complete, and the team has spent $220,000. Assuming the current cost performance trend will continue for the remainder of the project, what is the Estimate to Complete (ETC)?
First, calculate the key Earned Value Management (EVM) metrics:
Budget at Completion (BAC) = $500,000
Planned Value (PV) = 50% of BAC = $250,000
Earned Value (EV) = 40% of BAC = $200,000
Actual Cost (AC) = $220,000
Next, calculate the Cost Performance Index (CPI): CPI = EV / AC = $200,000 / $220,000 ≈ 0.91
Since the problem states the current cost performance trend is expected to continue, the formula for Estimate to Complete (ETC) is: ETC = (BAC - EV) / CPI ETC = ($500,000 - $200,000) / 0.91 ETC = $300,000 / 0.91 ≈ $329,670
This calculation provides the estimated additional cost to finish the project based on past performance.
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