# 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