Dec1999 PM217 : Project Management (Question 3) Suggested Solutions

(a)

Give two limitations of an earned-value analysis of general trends in work performance.

•The ability of accurate and timely cost data:unfortunately,the majority of the organisations have not established systems to collect such data (1 mark).

•Second limitations is educational:for the earned value approach to work properly,everyone in the organisation should have an understanding of its mechanics (1 mark).

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(b)

A software development company is handling a large project, which, because of its complexity,has been broken down into three stages.

Stage no. Planned cost Actual cost Earned cost

1 32,000 28,000 28,000

2 40,000 44,000 46,000

3 20,000 28,000 23,000

(i)Calculate the Cost Variance and Schedule Variance for each stage.[3 marks ]

(i)Cost variance and schedule variance:

CV =EC -AC SV =EC -PC

Stage 1 28 ,000 -28 ,000 =0 28 ,000 -32 ,000 =-4 ,000

Stage 2 46 ,000 -44 ,000 =2 ,000 46 ,000 -40 ,000 =6 ,000

Stage 3 23 ,000 -28 ,000 =-5 ,000 23 ,000 -20 ,000 =3 ,000

Award 2marks for using the correct formulas (deduct 1 mark for each incorrect formula);award 1 mark for correct arithmetic (no mark for any substantial error).

(ii)Calculate the percentage of the job achieved for each stage.[2 marks ]

(ii)Percentage of job achieved:

EC /PC *100%

Stage 1 28 ,000 /32 ,000 *100% =87 .5%

Stage 2 46 ,000 /40 ,000 *100% =115%

Stage 3 23 ,000 /20 ,000 *100% =115%

Award 1 mark for using the correct formulas (no mark if either is wrong);award 1 mark for correct arithmetic (no mark for any substantial error).[2 marks ]

(iii)Calculate the Cost Performance Index for each stage.[2 marks ]

(iii)Cost performance index:

CPI =EC /AC

Stage 1 28 ,000 /28 ,000 =1

Stage 2 46 ,000 /44 ,000 =1 .05

Stage 3 23 ,000 /28 ,000 =0 .82

Award 1 mark for using the correct formulas (no mark if either is wrong);award 1 mark for correct arithmetic (no mark for any substantial error).[2 marks ]

(iv)Calculate the Estimate at Completion factor for the project.[2 marks ]

You must show your working for each calculation.

(iv)Estimate at completion:

EAC =budgeted cost at completion /CPI
=BAC /CPI
=92 ,000 /((1 +1 .05 +0 .82 )/3 )
=92 ,000 /(2 .87 /3 )
=92 ,000 /0 .96
=95 ,833 .33

Award 1 mark for using the correct formulas (no mark if either is wrong);award 1 mark for correct arithmetic (no mark for any substantial error).[2 marks ]

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(c)

Draw a Gantt chart and a cumulative cost curve for both of the following scenarios.

(i)On time,within budget.[2 marks ]

(i)Detailed diagrams can be found in the Study Guide on page 9-8.If students give a correct diagram with proper labelling,award 2 marks;if they omit the labelling, then award 1 mark.

(ii)Cost and schedule overruns.[2 marks ]

(ii)Detailed diagrams can be found in the Study Guide on page 9-8.If students give a correct diagram with proper labelling,award 2 marks;if they omit the labelling, then award 1 mark.[2 marks ]

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