# Example with formular Standard Deviation, Communication Channels and Cost plus Percentage of Cost

### 13. Standard Deviation

Formula: Standard Deviation (σ) = (Pessimistic – Optimistic) / 6

Standard Deviation expressed by the character ‘σ’ represents the degree to which the values can change within a project. Let's imagine a task that takes 4 days to complete in the best case and 16 days to complete in the worst case. You would calculate standard deviation as

(Pessimistic – Optimistic) / 6

(16-4)/6

Standard deviation would be 2 in this case.

### 14. Communication Channels

Formula: Communication Channels = n(n-1) / 2

In a project, communication is key. This formula is used to measure the number of communication channels needed in a project. Here ‘n’ represents the number of stakeholders. If there are 12 stakeholders in the project, there will be communication channels between each stakeholder. If you are a stakeholder then you will be part of 11 communication channels. Similarly, every other stakeholder will be a part of 11 channels. This is the n-1 calculation. This number needs to be divided in two to remove the duplicate channels because your channel with a particular stakeholder and their channel with you should not be counted twice. In this scenario of 12 stakeholders the calculation will be as follows:

= n(n-1) / 2

12 (12-1)/2 = 66

We have 66 Communication channels in this case.

### 15. Cost plus Percentage of Cost

Formula: Cost plus Percentage of Cost = Cost + n%

This is a type of contract that is in the sellers' favor where the buyer agrees to pay all the costs incurred by the seller and adds a percentage of the total cost as payment. ‘n’ represents the agreed percentage that will be paid on top of the cost incurred. If n is 10% and the cost is 50. In this case the cost-plus percentage of cost will be calculated as:

Cost + n%

50 + (50 x 10/100)

=55

In this the cost the buyer pays more when there is an increase in the cost incurred. If the cost increases to 60 the buyer will need to pay 66.

## Example with formular Present Value (PV), Future Value (FV), Target Price and Point of Total Assumption

22. Present Value (PV) Formula: PV = Future Value / (1 + i)n   Present Value (PV) considers the time value of money. This is useful to calculate what a future amount of money would mean today if adjusted for time. ‘i’ represents the interest rate or the discounting rate. ‘n’ represents t...

## Example with formular Return on Investment (ROI), Payback Period and Cost Benefit Ratio

19.  Return on Investment (ROI) Formula: ROI = (Net Profit / Cost of Investment) x 100   Return on Investment is the measurement of the rate at which the amount invested in a project gets recovered. This is expressed as a percentage. If net profit is \$2000 and the Cost of Investment is ...

## Example with formular Cost plus Fixed Fee, Cost plus Award Fee and Cost plus Incentive Fee

16. Cost plus Fixed Fee Formula: Cost plus Fixed Fee = Cost + n   This is done in a contract where the buyer agrees to pay all the costs plus a pre-decided amount to the seller. ‘n’ stands for the fixed amount that is to be paid apart from the costs. With the cost at 50 and ‘n’ at 5 that...

## Example with formular Variance at Completion, Estimate to Complete (ETC) and To Complete Performance Index (TCPI)

10. Variance at Completion Formula:  Variance at Completion = Budget at Completion – Estimate at Completion   Variance at Completion calculates how much the project budget is accurate to the planned budget. This will help you to plan and estimate requirements more accurately.   If ...

## Example with formulas Beta Value in PERT, Expected Monetary Value (EMV) and Risk Priority Number

1. Beta Value in PERT Formula: Beta = (Pessimistic + 4 Most Likely + Optimistic) / 6   Beta value in PERT (Program Evaluation and Review Technique) is a weighted average taken from three values. Optimistic Value, Most Likely Value, and Pessimistic Value. Suppose a task takes 5 days to fi...

## Example with formular Cost Performance Index (CPI), Schedule Performance Index (SPI) and Estimate at Completion (EAC)

7.  Cost Performance Index (CPI)   Formula CPI = Earned Value / Actual Cost   The Cost Performance Index measures the cost efficiency of the project in utilizing the funds invested in it.  It is calculated through dividing earned value by actual cost. A higher CPI means that you are exce...

## 25 PMP Formulas you must remember to pass the PMP exam

Purpose Formula Description Calculate Beta Value in PERT (Program Evaluation and Review Technique) Beta = (Pessimistic + 4 Most Likely + Optimistic) / 6 This equation finds the expected value by giving weightage to the most likely Value. Calculate Estimated Monetary ...

## Example with formulas Earned Value, Cost Variance and Schedule Variance

4. Earned Value Formula:  EV = % Complete x Budget at Completion   Earned Value estimates the amount of work done in terms of monetary value.   It is calculated by multiplying the percentage of work completed and the project value represented by budget at completion.   If the Bu...