Cost Forecasting
By projecting cost variances into the future, you can use earned value calculations to forecast project completion costs.
Forecast of remaining cost (ETC) and work is always based on the schedule and can be calculated from early, late, or schedule dates using the remaining quantity of the resource and either escalated or un-escalated rates. If the activity has not yet started, the resource assignments on the activity are the forecast. For activities in progress, the remaining quantity and cost represent the forecast. This plus the actual costs comprise the estimate at complete. Changing the resource assignments on activities changes the forecast without changing the budget.
To calculate cost forecasting, you must first establish a value for the total budgeted cost (that is, a cumulative BCWS) for the project. This value is usually referred to as the Budget at Completion (BACcum).
After the Budget at Completion is established, an estimated cost at completion (Estimate At Complete or EAC) can be calculated using the following expression: EAC = ACWPcum + ETC.
This forecast of completion projects the current cost variance through the remainder of the project, assuming that all future work will proceed according to plan.
It is also possible to develop forecasts based on the assumption that past performance trends will continue to the end of the project. One way to do this is to define a Cost Performance Index (CPI) that reflects the efficiency with which value is earned, for example: CPI = BCWP / ACWP.
Related Topics
- Cost Control Features in Open Plan
- Understanding Open Plan Cost Calculations
- Earned Value Cost Control
- Cost and Schedule Variances
- Using the Progress Calculations Dialog Box
- Histogram Preferences Earned Value Tab
- Viewing Cost and Earned Value Data
- Displaying Earned Value Information on a Resource Histogram