Question 4 (14 Marks) A project was estimated to require 12,000 man-hours calcul

Question

Question 4 (14 Marks) A project was estimated to require 12,000 man-hours calculated at $60.00 per hour. Material costs were estimated as $100,000. The estimated duration was 6 months. The amount of workloadandmaterial consumption for each month was estimated as 10%, 20%, 30%, 20%, 10%, and 10% of the total. At the end of the 3-month, Earned Value Analysis was performed and it was realized that only 40% of the work was completed whereas 55% of the man-hours were spent. Moreover, 60% of the materials were used by the end of the 3rd month. Rework in the 2 month cost an additional $15,000. Calculate the following quantities based on an Earned Value Analysis at the end of the 3'd month. Each part is worth 2 marks. a) Budget at Completion (BAC) b) Budgeted Cost of Work Scheduled (BCWS) c) Budgeted Cost of Work Performed (BCWP) d) Actual Cost of Work Performed (ACWP) e) Schedule Variance (SV) f) Cost Variance (CV) g) Estimate at Completion (EAC)

Explanation / Answer

Answer:

Labour Cost        = $7,20,000 (12000 Man hours X $60 Per hour)

Material Cost     = $1,00,000

BAC                        = $8,20,000

Total Planned % completion at the end on 3rd month       = 60% (10% + 20% + 30% )

BCWS    = (Planned % Completion) X (BAC)

                = 60% of BAC

                =60% X $8,20,000

BCWS    = $4,92,000

Work completed at the 3rd month             = 40%

BCWP at end of 3rd month            = % of completed work X BAC (Budget at completion)

                                                                = 40% of $8,20,000

                                                                = $3,28,000

Actual Cost is the amount of money that you have spent at the end of 3rd Month.

Material Cost                                                     = $   60,000 (60% of Material cost)

Labour Cost                                                        = $3,96,000 (55% of Labour cost)

Additional Rework Cost in 2nd Month       = $   15,000                                         

Total Actual cost of work performed       = $4,71,000

SV           = BCWP - Planned value or BCWS

                = $3,28,000- $4,92,000

                = - $1,64,000

Since schedule variance is negative, that means you are behind schedule.

Cost Variance    = BCWP – ACWP

                                = $3,28,000 - $4,71,000

                                = - $1,43,000

Since Cost variance is negative, that means you are over budget.

EAC        = ACWP + (BAC – BCWP)

EAC        =$4,71,000 + ($8,20,000-$3,28,000)

EAC        = $9,63,000

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