Fundamentals Of Project Management

Cost and schedule variances an integrated

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Unformatted text preview: erms & Conditions, Copyright © 1996-2000 EarthWeb Inc. All rights reserved. Reproduction whole or in part in any form or medium without express written permission of EarthWeb is prohibited. Read EarthWeb's privacy statement. www.erpvn.net Fundamentals of Project Management by James P. Lewis AMACOM Books ISBN: 0814478352 Pub Date: 01/01/95 Search Tips Search this book: Advanced Search Previous Table of Contents Next Title Earned Value Analysis Using Spending Curves Variances are often plotted using spending curves. Figure 8-1 shows a BCWS curve for a project. This graph shows the cumulative spending planned for a project and is sometimes called a baseline plan. ----------- In case you do not have available software to provide the necessary data, we show in Figure 8-2 how to generate the data for the curve. Consider a simple bar-chart schedule. Only three tasks are involved. Task 1 involves forty labor-hours per week at an average loaded labor rate of $20 per hour, so that task spends $800/week. Task 2 involves one hundred hours per week of labor at $306 per hour, for a cost of $3,000 per week. Finally, task 3 costs $2,400 per week, based on sixty hours per week of labor at $40 per hour. Figure 8-1 Cumulative spending curve. Figure 8-2 Bar chart schedule illustrating cumulative spending. At the bottom of the chart we see that during the first week $800 is spent for project labor; in the second week, both tasks 1 and 2 are running, so the labor expenditure is $3,800. In the third week, all three tasks are running, so labor expenditure is the sum of the three, or $6,200. These are the weekly expenditures. The cumulative expenditures are calculated by adding the cost for each subsequent week to the previous cumulative total. These cumulative amounts are plotted in Figure 8-3. This is the spending curve for the project and is called a BCWS curve. Since it is derived directly from the schedule, it represents planned performance and therefore is called a baseline plan. Because control is exercised by comparing actual www.erpvn.net progress to planned progress, this curve can be used as the basis for such comparisons. Examples of Progress Tracking Using Spending Curves Consider the curves shown in Figure 8-4. On a given date, the project is supposed to have cost $50,000 (50K) in labor (BCWS). The actual cost of the work performed (ACWP) is 60K. (These figures are usually obtained from Accounting and are derived from all of the time cards that have reported labor applied to the project.) Finally, the budgeted cost of work performed (BCWP) is 40K. Under these conditions, the project would be behind schedule and overspent. Figure 8-5 illustrates another scenario. In this case, the BCWP and the ACWP curves both fall at the same point, that is, at 60K. This means that the project is ahead of schedule but spending correctly for the amount of work done. The next set of curves illustrates another possibility. In Figure 8-6 the BCWP and the ACWP curves are both...
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