Earned Value is a term which allows us to determine where we are in a project in terms of progress against plan. If we talk about expended cost at a particular moment of time we have no idea whether we are ahead or behind the plan unless we measure the amount of work done and the time expended doing it.
Earned Value allows us to make a measured judgment and may be defined as “The value of work performed expressed in terms of the the approved budget assigned to that work for a scheduled activity” – PMBOK
Earned Value Technique integrates the time, cost and work done.
EV = Earned Value – Estimated Value of the actual work completed.
AC = Actual Cost – Actual cost charged for the work done so far.
CV = Cost Variance – Difference of Earned Value minus Actual Cost.
CV = EV – AC
A positive value means UNDER budget.
A negative value means OVER budget.
Earned Value Technique is a useful tool for measuring progress against plan and for helping to control budget effectively.
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