See sidebar on computing eac if the cost and schedule

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Unformatted text preview: reserves, then management attention is needed to either correct the variance, or to replan the project. It is important to establish levels of variance at which action is to be taken. These levels are generally lower when cost and schedule baselines do not support Earned Value calculations. The first action taken to control an excessive negative variance is to have the cognizant manager or system engineer investigate the problem, determine its cause, and recommend a solution. There are a number of possible reasons why variance problems occur: • • Assessment Methods. The traditional method of cost and schedule control is to compare baselined cost and schedule plans against their actual values. In program control terminology, a difference between actual performance and planned costs or schedule status is called a variance. Figure 21 illustrates two kinds of variances and some related concepts. A properly constructed Work Breakdown Structure (WBS) divides the project work into discrete tasks and products. Associated with each task and product (at any level in the WBS) is a schedule and a budgeted (i.e., planned) cost. The Budgeted Cost of Work Scheduled (BCWSt) for any set of WBS elements is the budgeted cost of all work on tasks and products in those elements scheduled to be completed by time t. The Budgeted Cost of Work Performed (BCWPt) is a statistic representing actual performance. BCWPt, also called Earned Value (EVt), is the budgeted cost for tasks and products that have actually been produced (completed or in progress) at time t in the schedule for those WBS elements. The difference, BCWPt -BCWSt, is called the schedule variance at time t. The Actual Cost of Work Performed (ACWPt) is a third statistic representing the funds that have been expended up to time t on those WBS elements. The difference between the budgeted and actual costs, BCWPt ACWPt, is called the cost variance at time t. Such variances may indicate that the cost Estimate at Completion (EACt) of the project is different from the budgeted cost. These types of variances enable a pro...
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