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PMP Exam: Formulas, Values and Acronyms
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This is a combination of formulas, values and acronyms from various PMP exam prep sources.
Terms in this set (64)
Provide the Definition and formula for CV
Cost Variance: Provides cost performance of the project to determine if the project is going as planned.
CV = EV - AC
Negative=over budget=bad
Positive=under budget=good
Provide the Definition and formula for CPI
Cost Performance Index: Measure of the cost efficiency on a project.
CPI = EV/AC
>1=Great. We're getting >$1 for ever $1 spent.
1=Good. We're Getting $1 for every $1 spent.
<1=Bad. We're getting <$1 for every $1 spent.
Provide the Definition and formula for SV
Schedule Variance: Provides schedule performance of the project to determine if the project work is proceeding as scheduled
SV = EV - PV
Negative=behind schedule=bad
Positive=ahead of schedule=good
Provide the Definition and formula for SPI
Schedule Performance Index: Measure of schedule efficiency on a project. Determines if the project is behind, ahead of or on schedule).
SPI = EV / PV
>1=Great. Progressing faster than planned
1=Good. Progressing at planned rate
<1=Bad. Progressing at slower rate than planned.
EAC - Definition and how it's used (no formula required for this question)
Estimate at completion: Expected final and total cost of an activity or project based on project performance.
Helps determine an estimate of the total costs of a project based on actual costs to date.
How would you calculate EAC if current variances are thought to be typical in the future? (Note: this is the formula most often required on the exam).
EAC = BAC / CPI
(Original budget modified by the cost performance. Result is a monetary value.)
How would you calculate EAC if the original estimate was fundamentally flawed or conditions have changed and invalidated original estimating assumptions?
EAC = AC + ETC
(Actual cost plus a new estimate for the remaining work. Result is a monetary value.)
How would you calculate EAC if current variances are thought to be atypical in the future and the original budget is more reliable?
EAC = AC + (BAC - EV)
(Actual cost to date (AC) plus remaining budget (BAC-EV). Result is a monetary value.)
How would you calculate EAC if the project is over budget but still needs to meet a schedule deadline?
EAC = AC + ((BAC - EV)/(CPI * SPI))
(Actual cost to date plus remaining budget modified by both cost performance and schedule performance.
ETC - Definition and how it's used (no formula required for this question)
Estimate To Complete: Expected cost needed to complete all the remaining work for a schedule activity, a group of activities or the project. Helps predict what the final cost of the project will be.
How would you calculate ETC if no assumptions/keywords are used on the exam (Rita's formula)?
ETC = EAC - AC
Expected total cost - actual cost to date. Result is a monetary value that will tell us how much more the project will cost.
How would you calculate ETC if current variances are thought to be ATYPICAL in the future?
ETC = BAC - EV
The planned budget minus the earned value.
How would you calculate ETC if current variances are thought to be TYPICAL in the future?
ETC = (BAC - EV) / CPI
The planned budget minus the earned value modified by project performance.
How would you calculate ETC if it's thought that the original estimate was flawed?
No formula. Create a new estimate of the remaining cost.
What is the formula for Percent complete?
Percent complete = EV/BAC * 100
Provide the Definition and formula for TCPI
To-Complete Performance Index
The work remaining divided by the funds remaining.
Based on BAC:
TCPI = (BAC - EV) / (BAC - AC)
Based on EAC:
TCPI = (BAC - EV) / (EAC - AC)
Provide the Definition and formula for VAC
Variance at Completion; Anticipates the difference between the cost we originally planned and the cost we now expect.
VAC = BAC - EAC
<0 = over budget
0 = on budget
>0 = under budget
Provide the Definition and formula for EV
Earned Value
EV = % complete * BAC
Provide the Definition and formula for PERT
Program Evaluation and Review technique
3-point estimate for the expected duration of a scheduled activity using pessimistic, optimistic and most likely durations
(P + (4 * ML) + O) / 6
Provide the Definition and formula for PERT Standard deviation (Single Activity)
SD = (P - O) / 6
The result is the standard deviation from the mean of a schedule activity. For instance, the duration +/- 1 standard deviation will give you a 68.26% confidence that you can meet the estimated duration.
Provide the Definition and formula for PERT Activity Variance
Variance = ((P - O) /6)^2
Example of how this is used: PERT 3-point estimate gives a 15-day duration. The Variance formula tells you that you have a 2-day variance. The activity duration is 14 days +/- 2 days.
How do you calculate the PERT Standard Deviation for multiple activities
1. Calculate the variance of each activity
2. Add these up
3. Take the square root of the sum
What are the two formulas for Activity duration?
Duration = EF - ES +1
Duration = LF - LS + 1
Provide the definition and formula for Free Float
Free float is the number of days this activity can be delayed without delaying the early start of the next activity
Free Float = Earliest ES of following activities - ES of present activity - duration of present activity
Provide the definition and formula for Total Float
Total float is the number of days this activity can be delayed with delaying the project. 2 formulas:
Float = LS - ES
Float = LF - EF
Provide the definition and formula for EF
Early Finish: The day on which this activity can finish at the earliest.
EF = (ES + Duration) - 1
Provide the definition and formula for ES
Early Start: The day on which this activity can start at the earliest.
ES = (EF of Predecessor) + 1
Provide the definition and formula for LF
Late Finish: The day on which this activity can finish at the latest.
LF = (LS of successor) - 1
Provide the definition and formula for LS
Late Start: The day on which this activity can start at the latest.
LS = (LF - duration ) + 1
Provide the definition and formula for Present Value (PV)
The value of money received today instead of in the future.
PV = FV / (1+r)^n
The higher the PV the better
Provide the definition and formula for FV
Future value: Value of money on a give date in the future.
FV = PV * (1 + r)^n
Provide the definition and formula for NPV
Net Present Value: Standard method for the financial of long-term projects.
Formula not required - Select largest number.
Provide the definition and formula for ROI
Return on Investment: Ration of money gained or lost on an investment relative to the amount of money invested.
Formula not required - Select largest number.
Provide the definition and formula for IRR
Internal Rate of return: A capital budgeting metric used by firms to decide whether they should make investments.
No Formula required - Select largest number.
Provide the definition and formula for Payback Period
Rough tool to estimate the time it takes to recover the initial investment.
Add the projected cash inflow minus expenses until you reach the initial investment.
The project with the shorter payback period is better and should be selected.
Provide the definition and formula for BCR
Benefit Cost ratio: Compares benefits to costs
BCR = Benefit / Cost
BCR < 1 is bad.
BCR > 1 is good.
The project with the bigger BCR is the better one.
Provide the definition and formula for CBR
Cost Benefit ratio: Compares costs to benefits
CBR = Cost/Benefit
CBR > 1 is bad.
CBR < 1 is good.
The project with the smaller CBR is the better one.
How do you calculate the total number of communication channels among n people in a group?
n * (n-1)/2
How do you calculate the number of communication channels that one member of the team has with everyone else on the team
n - 1
Provide the definition and formula for EMV
Expected Monetary Value: A statistical technique that calculates the probable financial results of events.
EMV = Probability * Impact in currency
Provide the definition and formula for PTA
Point of Total Assumption: Contract price above which the seller bears all the loss of a cost overrun.
PTA = ((Ceiling Price - Target Price) / Buyer's share Ratio) + Target Cost.
The result is a monetary value. When reached, the seller covers all the cost risk beyond.
Provide the definition and formula for Straight Line depreciation
A method that depreciates the same amount or percent each year by dividing the asset's cost by the number of years it's expected to be in service.
Depreciation Expense = Asset Cost/Useful Life
Depreciation Expense = (Asset Cost - Scrap Value) / Useful life
Depreciation Rate = 100% / Useful Life
Provide the definition and formula for Double Declining Balance
An accelerated depreciation method that provides for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years.
Depreciation Rate = 2 * (100% / Useful Life)
Provide the definition and formula for Sum-of-Years Digits method
An accelerated depreciation method that results. Less accelerated than Double Declining Balance
How do you determine the Mean of a set of numbers?
The mean is the average
How do you find the Median in a set of numbers?
Arrange the values from lowest to highest and pick the middle one. Example: The mode of 2,4,6 is 4
If there is an even number of values, calculate the mean of the two middle values. 5 is the median in 2,4,6, 8 because 4 + 6/2 = 5
How do you find the Mode in a set of Numbers?
Arrange the values in order and find the number that occurs the most. 2 is the mode of 1,2,2,3
What is the meaning and value of 1 sigma?
1 sigma is 1 standard deviation. The value is 68.26%
What is the meaning and value of 2 sigma?
2 sigma is 2 standard deviations. The value is 95.46%
What is the meaning and value of 3 sigma?
3 sigma is 3 standard deviations. The value is 99.73%
What is the meaning and value of 6 sigma?
6 sigma is 6 standard deviations. The value is 99.99%
What is the range of Control Limits
Control limits reflect the expected deviation in the data and are usually 3 standard deviations above and below the mean
Describe 'Control Specifications'
Control Specifications are defined by the customer and must be looser than control limits.
What is the range of a 'Rough Order of Magnitude' estimate?
-50% to +50%
What is the range of a 'Preliminary' estimate?
-15% to +50%
What is the range of a 'Budget' estimate?
-10% to +25%
What is the range of a 'Definitive' estimate?
-5% to +10%
What is the range of a 'Final' estimate?
0%
Describe the Pareto diagram
80/20. For example, 80% of your problems are due to 20% of causes.
What percent of his/her time does a Project Manager spend communicating?
90%
What are the guidelines for Crashing a project?
1. Crash the tasks with the least expensive crash cost first.
2. Only crash activities on the Critical Path
What is the value of the inventory in a Just In Time (JIT) environment?
0% (or close to 0%)
When is Sunk Cost a factor in making project decisions?
Sunk cost is never a factor in making project decisions.
Provide the definition and formula for Opportunity Cost
Opportunity Cost is the cost incurred by choosing one option over another.
Opportunity Cost = The value of the project not chosen.
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