Earned value management (EVM) is the part of the PMP exam that worries people most — but there are only a handful of formulas, and they follow simple patterns. This guide explains each one in plain English, then works through one complete example.
The three numbers everything starts from
- PV — Planned Value: the value of the work you planned to have done by now.
- EV — Earned Value: the value of the work you actually got done by now.
- AC — Actual Cost: what you actually spent to get that work done.
Plus one more: BAC — Budget at Completion, the total budget for the whole project.
Memory trick: EV comes first
In every variance and index formula, EV goes first. Cost formulas compare EV with AC; schedule formulas compare EV with PV.
| Formula | What it tells you | Good result |
|---|---|---|
| CV = EV − AC | Cost variance: are we over or under budget? | Positive = under budget |
| SV = EV − PV | Schedule variance: are we ahead or behind? | Positive = ahead of schedule |
| CPI = EV ÷ AC | Cost performance index: value earned per $1 spent | Above 1.0 = under budget |
| SPI = EV ÷ PV | Schedule performance index: rate of progress vs plan | Above 1.0 = ahead of schedule |
Simple rule: negative variance or an index below 1.0 is bad news.
Forecasting formulas
- EAC = BAC ÷ CPI — Estimate at Completion, if current cost performance continues (the most common one on the exam).
- EAC = AC + (BAC − EV) — if the problem so far was a one-off and the rest of the work will go as planned.
- EAC = AC + (BAC − EV) ÷ (CPI × SPI) — if both cost and schedule performance will keep affecting the remaining work.
- ETC = EAC − AC — Estimate to Complete: how much more money the remaining work will need.
- VAC = BAC − EAC — Variance at Completion: how far over (negative) or under (positive) budget we will finish.
- TCPI = (BAC − EV) ÷ (BAC − AC) — To-Complete Performance Index: the cost efficiency we need from now on to finish on the original budget. (Use EAC instead of BAC in the bottom half if the target is the new EAC.)
Worked example
A software project has a total budget of $132,000. At the halfway review:
- PV = $66,000 (half the work was planned to be done)
- EV = $59,400 (45% of the work is actually done)
- AC = $72,000 (what has been spent so far)
Step 1 — Variances
CV = 59,400 − 72,000 = −$12,600 → over budget.
SV = 59,400 − 66,000 = −$6,600 → behind schedule.
Step 2 — Indexes
CPI = 59,400 ÷ 72,000 = 0.825 → we get about 82 cents of value for every dollar spent.
SPI = 59,400 ÷ 66,000 = 0.90 → we are progressing at 90% of the planned rate.
Step 3 — Forecasts
EAC = 132,000 ÷ 0.825 = $160,000 → the project will cost about this much if nothing changes.
ETC = 160,000 − 72,000 = $88,000 still to spend.
VAC = 132,000 − 160,000 = −$28,000 → we expect to finish $28,000 over budget.
TCPI = (132,000 − 59,400) ÷ (132,000 − 72,000) = 72,600 ÷ 60,000 = 1.21 → to finish on the original budget, the team must now earn $1.21 of value for every dollar — much better than the 0.825 it has achieved so far, so the original budget is very unlikely.
Exam tips
- Read which EAC situation the question describes: "current performance will continue" means BAC ÷ CPI.
- A question may give you percent complete instead of EV: EV = % complete × BAC.
- If a question asks "what should the project manager do?", the answer is rarely just a number — it's usually to analyse the cause and take corrective action with the team.
- Write the formulas down from memory at the start of your practice sessions until it's automatic.
Practise now
See every formula on one page and check your own numbers with the free PMP formulas cheat sheet and EVM calculator. Then test yourself with the free PMP practice questions and the PMP formula flashcards.