Question

In: Operations Management

You are completing a software development project. This project is expected to add SIX new features...

You are completing a software development project. This project is expected to add SIX new features to a popular software program you sell to customers. The projected cost for the project is $100,000 and the development is expected to take 5 weeks. At the end of the second week, you spent $17,500 per new software feature and you completed the development of two new features. You are about to start the development of the third new software feature. Based on this information find the BAC, PV, EV, and AC. Please show how you came up with answer.

Expert Solution

CALCULATION OF BAC, PV, EV, and AC:

BAC- BUDGET AT COMPLETION:

The authorised or planned cost of the project is called Budet At Completion.

Hence in the given problem the estimated budget for the new software project is $100,000.

So, BAC = $ 100,000

PV - PLANNED VALUE:

PV of the project is equal to BAC when the budget is fully assigned to a project. PV is the sum of the amount in budget assigned to a specifit project over a period of specific time.

Hence for the given problem PV = BAC

So, PV = & 100,000

EV - EARNED VALUE:

The total cost for the project actually completed is called earned value.That is for the percentage of work or project completed over a period of time.

Hence, in the given problem the amount spent per new software is $ 17,500

Completed two new features at the end of second week.

For 6 new features the budgeted amount is $100,000. Only 2 new features were completed, that is 1/3 rd of the work has been completed.

So, EV is 1/3rd of $100,000 = $33,333.33

AC - ACTUAL COST :

This is the cost actually incurred in performing the task or a project.

Hence in the given problem only 2 new features were completed at $17,500 per new software features.

So, AC = 2 x $17,500 = $35,000

keosha answered 8 months ago

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