Cost Performance Calculations
Cost performance calculations provide you with a means of measuring the extent to which the work, as represented by your cost breakdown structure, is being performed relative to how you had planned it.
Cost performance calculations implement a form of earned value management (EVM). Calculations are performed generally in accordance with A Guide to the Project Management Body of Knowledge, Project Management Institute, 4th edition, 2008. All calculations are performed at the cost item level. They are based on three concepts:
Budget at Completion (BAC): the budget set for the current cost item. This can be with or without tax.
Earned Value (EV): the value of the work performed to date. This is calculated as BAC x (% of work completed).
Actual Cost (AC): the actual amount spent on the current cost item to date.
Budget at completion, BAC, can be expressed with or without tax. If the actual cost, AC, is given inclusive of tax, BAC should also be inclusive of tax. If AC is exclusive of tax, BAC should also be exclusive of tax.
Cost performance calculations require two inputs from you at the cost item level:
% of work completed: the extent to which the work represented by the current cost item has been completed.
Actual costs to date: the amount of money spent to achieve this amount of work. Same as AC (Actual Cost).
Mandrel uses these inputs to calculate:
Cost variance (CV): the difference between the earned value (EV)and the actual amount spent (AC).
Cost performance index (CPI): the ratio of the earned value to the actual amount spent.
Mandrel then calculates two overall performance estimates, based on these values:
Estimate to completion (ETC): the cost required to complete the work represented by the current cost item, based on performance to date.
Estimate at completion (EAC): the total cost predicted for the current cost item when the work is completed, based on performance to date.