Blogs / 25 PMP Formulas you must remember to pass the PMP exam

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 the Budget at completion was $20,000 and you find that the Estimate at completion is $25,000, then you could calculate the Variance at completion by calculating:

Budget at Completion – Estimate at Completion

20000 – 25000 = -5000

You will get at Variance at Completion of –5000. Which means the project is going beyond the initial budget by $5000

11. Estimate to Complete (ETC)

Formula: Estimate to Complete = Estimate at Completion – Actual Cost

Estimate to Complete or ETC is a measure of how much funds will be required to complete the remaining work. This will help you by giving a dynamic value that is more accurate than your initial estimates.

For example, if the Estimate to complete is calculated at $25,000 and the Actual Cost incurred is $10,000. In this case you can calculate the Estimate to Complete as follows.

Estimate at Completion – Actual Cost

25000 – 10000

=$15,000

This means that you will need $15,000 at this point to successfully complete the project.

12. To Complete Performance Index (TCPI)

Formula:

TCPI = (Budget at Completion – Earned Value) / (Estimate at Completion – Actual Cost)

TCPI = (Budget at Completion – Earned Value) / (Budget at Completion – Actual Cost)

To Complete Performance Index (TCPI) gives the cost performance required to meet project goals based on the budget that is available. If the Budget at completion is $20,000, Estimate at Completion is $25,000, Earned Value is at $10,000 and Actual Cost is at $ 12,000. In this situation we would calculate TCPI as (Budget at Completion – Earned Value) / (Estimate at Completion – Actual Cost)

(20000-10000)/ (25000-12000)

= 10000/13000 = 0.77

The TCPI would be at 0.77

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 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 d...

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...