TOPIC: A question on ETC

Hi

Can any one explain, why PV= 250,000X2 = 500,000 and SPI is not considered in below calculation.

I tried to use formula EAC= BAC/(SPI* CPI)

Please advise....


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Question: You are working on a 12 month assignment to build a website with 4,000 pages for $1,000,000. You are supposed to spend $250,000 every 3 months. After 6 months, you determine that only $400,000 of work is completed and cost incurred is $800,000. What is the ETC?

Choice 1. $2,000,000

Choice 2. $1,500,000

Choice 3. $1,000,000

Choice 4. $1,200,000

Correct Choice: 4

Justification



The default value of EAC (assuming current variances are typical) is calculated as below:

CPI = EV/AC
CPI = $400,000 / $800,000
CPI = 0.5

EAC = BAC/CPI
EAC = $1,000,000/0.5
EAC = $2,000,000

So, ETC = EAC – AC = $2,000,000 – $800,000 = $1,200,000

Reference: PMstudy.com comments

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Hi Puneet,

With regard to your questions:

Can any one explain, why PV= 250,000X2 = 500,000

The planned spending is $250,000 every 3 months. Since the calculation is taking place at the end of 6 months, then the PV is for 2 time periods, which yields 2 x $250,000 = $500,000

SPI is not considered in below calculation

Because the question does not indicate that a deadline exists for completion, we would not use SPI, hence the EAC= BAC/(SPI* CPI) formula is not appropriate for this particular scenario. It will yield a much higher cost. The question is a wee bit tricky, since they do give you enough information to calculate the SPI, even though it is not needed for the given scenario.

I hope this helps!

Regards,

Tracy