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Key Concept and Formulas for PMP Exam

Earn Value Formulas

PV (Planned Value) = BCWS (Budgeted Cost of Work Scheduled EV (Earned Value) = BCWP (Budgeted Cost of Work Performed) AC (Actual Cost) = ACWP (Actual Cost of Work Performed) SV = EV PV (minus is ehind schedule) CV = EV AC (minus is o!er udget) SP" = EV#PV ($ess than % is ehind schedule) CP" = EV#AC ($ess than % is o!er udget) EAC = AC & (BAC'EV) (se )hen !ariances are at*+ical EAC = AC & ,(BAC'EV)#CP"- (se )hen !ariances are t*+ical (.ote/ 0his is the same as EAC = BAC#CP") VAC = BAC EAC E0C = BAC EV (se )hen !ariances are at*+ical E0C = (BAC EV)#CP" (se )hen !ariances are t*+ical E0C = EAC AC (se )hen original estimates )ere fla)ed

Project Selection Financials

.PV (.et Present Value) = FV#(%&r)n FV= Future Value1 r= interest rate1 n= no2 of time +eriods 3igher .PV is etter "44 ("nternal 4ate of 4eturn) = Sol!e the .PV e5uation for 6r7 Also called 3urdle 4ate 3igher "44 +ercentage is etter BC4 (Benefit#Cost 4atio) 3igher BC4 is etter2 Be)are1 e8am can call it CB41 )here lo)er is etter 49" (4eturn on "n!estment) = Earnings#"n!estment 3igher 49" is etter Pa* ack Period = 0ime to reco!er cost of the +ro:ect $o)er +a* ack +eriod is etter Cash Flo) = Cash "n Cash 9ut

.et)ork ;iagram
Precedence ;iagramming <ethod (P;<)

Calculating Stackor Float

Also called Acti!it* on .ode (A9.)/ Acti!ities are in o8es <ost commonl* used toda* 3as = relationshi+s/ F'S1 S'S1 F'F1 S'F .o 6dummies7 (>ero duration de+endencies) allo)ed Can anal*>e using either 0hree'Point Estimates or CP<

0otal Float (also called Slack1 Float1 or Pro:ect Float) is the total amount of time an acti!it* can e dela*ed )ithout dela*ing the +ro:ect finish date2 Free Float#Slack is the amount of time an acti!it* can e dela*ed )ithout dela*ing its successor (follo)ing acti!it*)2

Arro) ;iagramming <ethod (A;<)

$S ES/ $F EF/

Calculates slack )ith for)ard +ass Calculates slack )ith ack)ards +ass

Also called Acti!it* on Arro) (A9A) 9nl* % relationshi+/ F'S Can ha!e 6dummies7 Can anal*>e using either 0hree'Point Estimates or CP<

$ag 0ime/ "nserted )ait time et)een acti!ities $ead 0ime/ 9!erla++ing acti!ities1 also called +aralleling or fast tracking2 6$ead "n@ $ag 9ut7

?ra+hical E!aluation and 4e!ie) 0echni5ue (?E40)

Allo)s loo+s and re+etiti!e acti!ities

Three Point Estimates, or PERT

Accuracy of Estimates
9rder of <agnitude/'DEF to &GEF Budget Estimate/'%HF to &DEF ;efiniti!e Estimate/'EF to &%HF

PE40 = P49?4A< E!aluation and 4e!ie) 0echni5ue 3olds schedule and lets cost float A estimates for each task/ 9+timistic1 Pessimistic1 and <ost $ikel* <ean Estimate = (9 & =B<$ & P)#C Standard ;e!iation (s) = (P 9)#C

Variance = sD 1 or ,(P 9)#C-D Standard de!iation of tasks on CP =

Sum of !ariances

Conflict Resolution (Best to Worst) Powers of a Project Manager

%2 E8+ert/ Best1 earned on *our o)n D2 4e)ard/ .e8t est2 Based on P< +osition A2 Formal/ Po)er1 ased on P< +osition =2 4eferent/ 4eferring to +ositions of others E2 Penalt*/ Worst2 Based on P< +osition %2Pro lem Sol!ing/ Also called Confronting D2 Com+romising/ Solutions satisf* oth +arties A2 Withdra)al/ Post+oning a decision =2 Smoothing/ Em+hasis on agreement E2 Forcing/ 9ne !ie)+oint at e8+ense of another2

Sources of Conflict (9rder of Priorit*)

%2 Schedules D2 Pro:ect Priorities A2 4esources =2 0echnical 9+inions E2 Administrati!e Procedures C2 Cost G2 Personalit*

Herzbergs Motivators
%2 Achie!ement D2 4ecognition A2 Challenge of the )ork itself =2 4es+onsi ilit* E2 Ad!ancement C2 ?ro)th

Channels of Communication
Between Team Members = N(N- !"#

Pro:ect is closed )hen administrati!e closure is com+lete2 Administrati!e closure is done at end of each Pro:ect Phase and at the end of the Pro:ect2 Contract closure/ !erification that deli!era les )ere acce+ta le@ it is done once at the end of the contract2 Contract Closure Procedure is +roduced under 6Close Pro:ect7

Formulas to memori>e for P<P2 EV = FCom+leteBBAC AC = FS+entBBAC CV = EVAC (IH ?ood) SV = EVPV (IH ?ood) CP" = EV#AC (I% ?ood) SP" = EV#PV (I% ?ood) EAC = AC&Bottom u+ E0C Best ho)e!er team has to sto+ )orking and s+end time

Terms Used Planned Value (PV) Actual Cost (AC) Earned Value (EV) Budget At Com+letion (BAC) Cost Variance (CV) Schedule Variance (SV) Cost Performance "nde8 (CP")

EAC = AC&BACEV 4emaining )ork to e +erformed at udgeted rate EAC = BAC#Cumulati!e CP" 4emaining )ork to e +erformed at +resent CP" EAC = AC&(BACEV)#(Cumulati!e CP"BCumulati!e SP") 4emaining )ork to e +erformed at +resent rate in!ol!ing oth SP" and CP" E0C = EACAC or 4e'estimate

Schedule Performance "nde8 (SP") Estimate at Com+letion (EAC) Estimate to Com+lete (E0C) Variance At Com+letion (VAC) Pro a ilit* (P) "m+act (") E8+ected <onetar* Value (E<V)

VAC = BACEAC E8+ected Acti!it* ;uration (EA;) 0CP" = (BAC'EV)#(BAC'AC ) or (EACAC) EAC )ill e used once it is determined BAC is no longer achie!a le1 less then % is good PV = FV#(%&r)

Standard ;e!iation (S;) $ate Start1 Earl* Start1 $ate Finish1 Earl* Finish ($S1 ES1 $F1 EF) Point of 0otal Assum+tion (P0A) 0o Com+lete Performance "nde8 ,0CP"-

Communication Channels = n(n'%)#D E<V = PB" PE40 EA; = (9&=<&P)#C PE40 Pro:ect ;uration = Sum of PE40 EA;s S; = (P'9)#C Variance of Acti!it* = ,S;-D = ,(P'9)#C-D S; of Pro:ect = S5uare 4oot of Var% & !arD & JJ 4ange of acti!it* duration = EA; &#' S; 0otal Float#Slack = $S'ES or $F'EF >ero on critical +ath BC4#"44#.PV Bigger is etter <ean A!erage

<edian Center num er#!alue or a!erage of center !alues <ode 0he most fre5uent num er Contract "ncenti!es Sa!ings = 0arget Cost Actual Cost Bonus = Sa!ings 8 Percentage Contract Cost = Bonus & Fees 0otal Cost = Actual Cost & Contract Cost P0A = (Ceiling Price 0arget Price)#Bu*erKs Share ratio &0arget Cost