DAVION

SYSTEMS

Estimate At Completion

 

Estimate at completion (EAC) is the total cost predicted for a cost item or for the project as a whole when the work is completed, based on the performance to date.

 

Two methods of calculating EAC are available:

 

          1.   EAC = AC + BAC – EV

          2.   EAC = AC + (BAC – EV) / CPI

 

where:    BAC is the budget at completion, i.e. the amount budgeted for the cost item or project

             AC is the actual cost expended to date

             EV is the earned value

             CPI is the cost performance index

 

Use method 1 if you think that any cost overrun or underrun to date is an exceptional event, and that the remainder of the cost item or project will be completed more or less as you have planned.

Use method 2 if you think that any cost overrun or underrun to date is an indication that your cost estimates were generally too optimistic or pessimistic, as the case may be, so that the remainder of the cost item or project will incur similar overruns/underruns.

 

Example

          Budget at completion (BAC)                 =  $1000

          % of work completed                           =  60%

          Earned value (EV)                               =  $1000 x 60%  =  $600

          Actual cost (AC)                                 =  $750

          Cost performance index (CPI)              =  $600 / $750  =  0.8

          Estimate at completion (method 1)   =  $750 + ($1000 - $600)  =  $1150

          Estimate at completion (method 2)   =  $750 + ($1000 - $600) / 0.8  =  $1250