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PMP lesson · Cost & EVM · Cost: estimating, budget and earned value · lesson 3 of 5 · about 8 minutes

Earned value basics: PV, EV, AC, CPI and SPI

Predictive · also used in hybrid reportingFree preview
Goal: After this lesson you can read any earned value report and say, in one sentence, whether the project is ahead or behind, and over or under budget.

1The situation

Are we OK?

You manage a robot cell project. Budget: $100,000. Duration: 10 weeks.

At the end of week 5, the sponsor asks: “Are we OK?” Your team says: “We spent $60,000, and we are halfway through the schedule.”

Is that good or bad? You cannot tell. Spending $60,000 is fine if you finished $60,000 worth of work. It is a disaster if you finished only $30,000 worth. To answer the sponsor, you need a third number: how much work is actually done. That third number is earned value.

2Three numbers answer three questions

Earned value always uses three numbers, all in money:

PV
Planned Value
How much work should be done by now?
Plan says: by week 5, $50,000 of work.
EV
Earned Value
How much work is really done, valued at its budget?
40% of the cell is done: 40% × $100,000 = $40,000.
AC
Actual Cost
How much money did we really spend?
Invoices and hours so far: $60,000.

The total budget is called BAC, budget at completion: here $100,000.

Key idea: EV is the budget value of the work done, not the money spent. That is why it can be compared with both the plan (PV) and the spending (AC).

3See it in one picture

$0k$25k$50k$75k$100k wk 0wk 2wk 4wk 6wk 8wk 10 Today (week 5) PV $50kEV $40kAC $60k CV −$20k SV −$10k PV (plan) reaches BAC $100k PV: planned workEV: work really doneAC: money spent
The plan (PV) says $50k of work by week 5. Only $40k of work is done (EV), and $60k was spent (AC). The gaps between EV and the other two lines are the variances.

4How it looks on the exam

Exam-style question 1. At the monthly review, a project reports a planned value of $120,000, an earned value of $108,000 and an actual cost of $96,000. Which statement BEST describes the project's status?
A. Ahead of schedule and over budget
B. Behind schedule and under budget
C. Behind schedule and over budget
D. Ahead of schedule and under budget
Show the answer and the decode
Answer: B.
In simple English
Three numbers are given. You must say if the project is early or late, and over or under budget.
What is the question really asking?
The project's schedule and cost status.
Key words / trigger
“planned value … earned value … actual cost”
PMP logic
SPI = 108 ÷ 120 = 0.90 → behind schedule. CPI = 108 ÷ 96 = 1.125 → under budget.
Why the wrong answer looks attractive
Comparing PV ($120k) with AC ($96k) suggests the project is simply 'under budget' and on track, but EV shows that less work was done than planned.

5Remember this

Your memory card

  • PV = should be done · EV = really done (in budget $) · AC = really spent
  • EV first in every formula: SV = EV − PV · CV = EV − AC · SPI = EV ÷ PV · CPI = EV ÷ AC
  • Negative or below 1 = bad. Positive or above 1 = good.
  • SPI is about work, not days: check the critical path before saying the project will be late.
The full lesson in the PMCLEAR app also has:
  • the rest of the lesson (Two differences: SV and CV, Two ratios: SPI and CPI)
  • a worked example
  • the common traps (wrong vs right)
  • 2 exam-style questions with the decode
  • a 3-question quick check
  • an interactive calculator
Open the full lesson → Create a free account
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