Formula based questions in PMP are an easy area to score because the concepts are easily understood, and once you understand them the math is quite simple, and gives you a great scoring opportunity that you shouldn’t miss. I’m listing down the different concepts that you should know in order to get all the numbers related problems correct.

**Scheduling**

**Three Point Weighted Average Estimate: **This is used for scheduling, and is calculated as:

**(O +4M + L)/6**

**Standard Deviation:** This is very simple in the context of PMP and can be calculated with the following formula:

**(P – O)/6** where P is the Pessimistic Estimate, and O is the Optimistic Estimate.

**Duration of an Activity:** Late Finish – Late Start or Early Finish – Early Start

**Rough order of Magnitude:** +/- 50%

**Budget Estimate: **-10% to +25%

**Definitive Estimates:** -5% to 10%

# Opportunity Cost

If there are two projects A & B, and the NPV of A is $85,000 and B is $50,000 then the opportunity cost of selecting project A is $50,000.

# Communication Channel

**Communication Channels:** This is another very simple one to calculate, and can be calculated as **n*(n-1)/2**. The questions trick you by asking how many new channels were added, sometimes you forget to include yourself to see what n is but other than that it is pretty simple.

**NPV:** These type of questions are common, and they give you a certain cash flow, discount rate, number of years, and ask you which project to select. For instances where there is just one cash inflow, you can use the simple formula:

**PV = FV / [(1+i)^n]**

If there is more than one year then unfortunately you have to calculate this for every year and then sum the number but that itself shouldn’t take a lot of time.

# Earned Value Measurement

There are several questions on EV (Earned Value), and I found that the best way to get a handle on this was to walk through an example in my head.

Say, there is a project that is 5 weekdays long, and you expect $10 worth of work to be done every day. This project will be **$50** when it is finally completed, and that is the **BAC (Budgeted At Cost)**.

So, on Tuesday, you would expect **$20** worth of work to be done which is the **(PV) Planned Value on Tuesday.**

On Tuesday you find that only Monday’s work has been done, so now your **EV (Earned Value) is just $10**. To your great dismay, you find that the work that was done actually cost you **$15 so that is your AC (Actual Cost)**

Your **Cost Variance** is what you got done minus what it cost you so **EV – AC** viz. -5$ in this case. The **Cost Performance Index** is how well you are doing on cost, and that is measured as **EV/AC** so 10/15 or 0.67 in this case.

For Variance, remember that negative is bad, and for indices, remember that a number less than 1 is bad, and a number greater than one is good.

To see how you are doing with time, you know that you had to accomplish $20 worth of work but did only $10 worth of work so in terms of schedule you are $10 behind.

**Schedule Variance** can be calculated as **Earned Value – Planned Value**, so **-10$** in this case.

**SPI (Schedule Performance Index) is EV/PV so 0.50** in this case.

**EAC is Estimate At Actuals**, and means how much do we expect the project to cost when it is complete. There can be three situations.

When the current variation is one off, in which case:

EAC = (BAC-EV) + AC

When the current variance in cost or schedule is expected to continue:

BAC/CPI or BAC/SPI

When the current variance in cost and schedule is expected to continue:

(BAC – EV) / (CPI x SPI)

The To Complete Performance Index can be calculated as BAC – EV / BAC – AC

Finally, the VAC (Variance at Complete) can be calculated as BAC – EAC.

Understanding these numbers is great because they don’t take a lot of time, and once done gives you guaranteed points on the exam!

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