Question

In: Operations Management

Scenario 2: You are the project manager of a project to install stone fireplaces at an...

Scenario 2: You are the project manager of a project to install stone fireplaces at an new condo development. A total of 24 fireplaces are planned to be installed over a 4-month period. The total budget for the project is $144,000. The project is at the end of the 1st month and 5 fireplaces have been installed and $28,000 has been spent.

What is the project’s PV?

What is the project’s EV?

What is the project’s AC?

What is Cost Variance??

What is the Schedule Variance?

What is the project’s CPI?

What is the project’s SPI?

Based on your answers in questions 3-6, is the project on budget, under budget or over budget?

Based on your answers in questions 3-6, is the project on schedule, behind schedule or ahead of schedule?

Expert Solution

The budget at completion = $144,000

Project duration = 4 months

Activity = installation of 24 fireplaces

At the end of the 1st month, only 5 fireplaces are installed and actual cost is $28,000

According to plan, at the end of 1st month the project cost = $144,000/4 = $36,000

Planned Value at the end of 1st month = $36,000

% of Project completion at the end of the 1st month = 5 installed / 24 to be installed x 100 = 20.83%

% of Project completion at the end of the 1st month = 20.83%

Earned value of at the end of 1st month = % complete x budget = 20.83 % x $144,000 = $30,000

Actual cost ate th end of 1st month = $28,000

Planned Value at the end of 1st month = $36,000

Earned value of at the end of 1st month = $30,000

Actual cost ate th end of 1st month = $28,000

The Earned Value analysis of the project is as follows

EV	Earned Value	EV	30,000
AC	Actual Cost	AC	28,000
PV	Planned Value	PV	36,000
CV	Cost Variance	EV - AC	30,000 – 28,000 = 2,000
SV	Scheduled variance	EV – PV	30,000 – 36,000 = -6,000
CPI	Cost performance Index	EV/AC	30,000/28,000 = 1.0714
SPI	Scheduled performance Index	EV/PV	30,000/36,000 = 0.833

If SV is positive or SPI >1, the project is ahead of planned value otherwise lagging behind

If CV is positive or CPI > 1, the project under budget otherwise under budget

For the give project: CV is positive and CPI >1, the project is under budget

For the give project: SV is negative and CPI <1, the project is lagging behind

keosha answered 4 months ago

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