PMP Topics: EV, PV, and AC

What do you think when you read the words “Earned Value Management”? If you answered “nervous,” then you are not alone. (If you answered “excited,” then you are weird.) Earned Value Management (also known as EVM), the most serious math on the PMP exam, is not so difficult to master, especially once you have mastered the key PMP topics of Earned Value, Planned Value, and Actual Cost.

The first time you read the PMBOK guide, you encounter a tidal wave of information about earned value management. Instead of giving you all of the information, we’re going to focus on the most basic information so that you can have a solid foundation of knowledge.

pmp topics

PMP Topics: Planned Value (PV)

PV is your baseline. PMBOK calls it the “authorized budget assigned to scheduled work” (218). It is the definitive number to which you compare AC and EV.

PMP Topics: Actual Cost (AC)

AC is the actual cost of your project so far. Use it when you are measuring costs. Re-read that sentence — it sounds silly, but compare it what PMBOK says. AC “is the realized cost incurred for the work performed on an activity during a specific time period” (219). PMBOK, by being technical, actually makes something as simple as “actual cost” confusing at first glance.

When you’re just getting started with EVM, just remember that actual cost is what you have actually spent.

PMP Topics: Earned Value (EV)

EV “is a measure of work performed expressed in terms of the budget authorized for that work” (PMBOK, 219). In other words, EV tells you how far along your project is. Let’s use an example to illustrate these three terms:

Because you’re one cool dude and future PMP, your friend asks for help in building his motorcycle from scratch. After planning, you determine that the motorcycle will cost $100,000 at completion. You plan for the project to last from July 1 to December 31 and have allocated costs and schedule equally across duration of the project. On October 1, you realize that the motorcycle is only 25% complete and has cost $75,000. What are the PV, EV, and AC of the motorcycle?

Try it yourself, then scroll down for answers.

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Answers

PV = $50,000. You planned for the motorcycle to cost $100,000 after six months, and you are three months into the project. Additionally, you allocated cost and schedule equally across months, so 3/6 months * $100,000 = $50,000.
EV = $25,000. The motorcycle is only 25% complete. 25% * $100,000 = $25,000.
AC = $75,000. The easiest one — the problem tells you that the motorcycle has so far cost you $75,000.

Ready for more formulas? Check out our advanced article on Sample Questions on PMP Earned Value Management.

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2 Responses to PMP Topics: EV, PV, and AC

  1. j_sparrow April 11, 2019 at 6:21 pm #

    thanks Rich, the concepts of pv, ev, ac are very well explained in a simple way, greate work!

    • Magoosh Test Prep Expert
      Magoosh Test Prep Expert April 14, 2019 at 9:33 pm #

      On behalf of Rich, you’re welcome! 🙂 Glad to hear that you’re finding these posts helpful.


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