Read earned value as a management story
What did we plan and budget?
What value did we earn and spend?
Are cost and schedule efficient?
What is the likely finish and needed action?
Calculate only after identifying the question: current variance, efficiency, total forecast, remaining cost, or efficiency required to hit a target.
The four foundation values
Budgeted value of work scheduled by the status date.
Budgeted value of work actually completed by the status date.
Actual cost incurred for the completed work.
The approved total budget for the measured scope. BAC is a whole-project baseline value, while PV, EV and AC describe status-date performance.
Current performance: variances and indexes
EV − ACPositive is under budget; negative is over budget.EV − PVPositive is ahead in earned work; negative is behind.EV ÷ ACAbove 1 is cost-efficient; below 1 is cost-inefficient.EV ÷ PVAbove 1 earned more than planned; below 1 earned less.Variance answers “how much?” in currency or budget units. An index answers “at what efficiency?” A CPI of 0.80 means the project earns 0.80 of budgeted value for every 1.00 spent.
EAC: choose the forecast assumption first
EAC = BAC ÷ CPI
Use when the observed cost performance is expected to continue.
EAC = AC + (BAC − EV)
Use when the past variance is atypical and remaining work can follow the original estimate.
EAC = AC + (BAC − EV) ÷ (CPI × SPI)
Use when the scenario states both efficiencies affect remaining cost.
EAC = AC + bottom-up ETC
Use when the remaining work has been re-estimated in detail.
EAC − ACForecast cost of work remaining.BAC − EACExpected budget surplus or deficit at completion.TCPI: efficiency required on remaining work
TCPI = (BAC − EV) ÷ (BAC − AC)
Compares remaining budgeted work with the money remaining in the original budget.
TCPI = (BAC − EV) ÷ (EAC − AC)
Compares remaining budgeted work with the money remaining in the forecast target.
A high TCPI does not automatically mean “work harder.” It signals that the target requires stronger future cost efficiency. Compare it with current CPI, assess realism, investigate causes and follow change/governance processes where needed.
Complete worked example
A project has BAC = $100,000. At the status date, PV = $60,000, EV = $50,000 and AC = $62,500.
CV = −$12,500
$50,000 − $62,500. CPI = 0.80, so the project is cost-inefficient.
SV = −$10,000
$50,000 − $60,000. SPI ≈ 0.83, so less work is earned than planned.
EAC = $125,000
$100,000 ÷ 0.80 if current cost efficiency continues.
ETC, VAC and TCPI
ETC: $125,000 − $62,500 = $62,500
VAC: $100,000 − $125,000 = −$25,000
TCPI to BAC: ($100,000 − $50,000) ÷ ($100,000 − $62,500) = 1.33
TCPI to EAC: $50,000 ÷ $62,500 = 0.80
The original budget now requires 1.33 cost efficiency on remaining work—far stronger than the current 0.80. The $125,000 forecast is consistent with continuing at 0.80. This evidence should drive cause analysis, stakeholder communication and appropriate forecast/change decisions.
Interpret before recommending action
- Validate data: confirm the status date, baseline, completion measurement and actual-cost timing.
- Find causes: separate one-time variance, scope change, rate variance, productivity, rework and risk impact.
- Check trends: one period can mislead; compare cumulative and recent performance.
- Use the schedule: SPI does not replace critical-path and milestone analysis.
- Forecast honestly: choose EAC assumptions that match current evidence.
- Engage owners: develop corrective options with the team and relevant stakeholders.
- Control changes: update approved baselines or forecasts through the organization’s governance process.
PMI’s current exam increases emphasis on value and business impact. Cost and schedule metrics are inputs to decisions; project success also requires stakeholder value, outcomes, risk and strategic alignment.
PMP practice checks
EV is $90,000 and AC is $100,000. What is CPI?
Answer: 0.90. The project earns $0.90 of budgeted value per $1.00 spent and is cost-inefficient.
The original variance will not continue and remaining work is expected at the planned rate. Which EAC?
Answer: AC + (BAC − EV). The scenario explicitly rejects continued historical cost efficiency.
SV is negative. Should the project manager immediately crash the schedule?
Answer: No. Validate status data, inspect the schedule and critical path, understand causes and impacts, then evaluate response options with the team and stakeholders.
Common PMP formula mistakes
- Swapping the CPI and SPI denominators.
- Interpreting a negative variance as favorable.
- Selecting EAC from memory without reading its assumption.
- Using BAC-target TCPI when the question specifies an approved EAC target.
- Calling EAC the remaining cost instead of total forecast cost.
- Treating SPI as an exact calendar completion forecast.
- Rebaselining simply to hide poor performance.
- Calculating correctly but skipping validation and cause analysis.
Frequently asked questions
What do CPI and SPI below 1 mean?
CPI below 1 means the project is earning less budgeted value than each unit of actual cost, indicating cost inefficiency. SPI below 1 means less budgeted work has been earned than planned by the status date. Investigate causes and forecasts rather than reacting to one number alone.
Which EAC formula should I use on the PMP exam?
Use the formula that matches the scenario's assumption. BAC divided by CPI assumes current cost efficiency continues. AC plus BAC minus EV assumes remaining work will perform at the original planned rate. Dividing remaining work by CPI times SPI assumes both cost and schedule performance will influence the remaining cost.
What is the difference between EAC and ETC?
Estimate at Completion forecasts total project cost. Estimate to Complete forecasts only the remaining cost from the status date. Therefore ETC equals EAC minus AC when EAC and AC use the same basis.
What does TCPI measure?
The To-Complete Performance Index is the cost efficiency required on remaining work to meet a target. Use BAC minus EV over BAC minus AC for the original budget target, or BAC minus EV over EAC minus AC for an approved forecast target.
Does SPI predict the exact completion date?
No. Traditional SPI is expressed through budgeted value and normally approaches 1 as all planned work is earned. Use the schedule network, critical path, forecasts and milestone evidence to determine calendar completion impact.
Official PMI references
Confirm the current certification and exam domains on the official PMP certification page and July 2026 exam update. PMI learning-library resources explain CPI and SPI definitions and EVM analysis and action. ITCertPath provides independent education and does not reproduce confidential exam questions.