From estimate to budget, layer by layer
- Cost estimates
- The bottom layer: what each activity and work package in the work breakdown structure (WBS) should cost. Early estimates are wide ranges and narrow as the work is better understood.
- Contingency reserve
- Money set aside for identified risks, the known unknowns. The risk management plan says who may draw on it and when.
- Cost baseline
- The approved budget line that cost performance is measured against. Drawn cumulatively over the life of the project it makes an S-curve that ends at the budget at completion. Changing it takes formal change control.
- Management reserve
- Money for unknown unknowns, held by management outside the cost baseline. Using it needs approval and a baseline update.
- Budget at completion (BAC)
- The total planned value of the work, equal to the cost baseline at its end point. Every forecast on this page is compared with it.
Earned value formulas and how to read them
| Measure | Formula | How to read the result |
|---|---|---|
| Cost variance (CV) | EV − AC | Negative: the work done cost more than its budget |
| Schedule variance (SV) | EV − PV | Negative: less work done than planned by now, in money terms |
| Cost performance index (CPI) | EV ÷ AC | Below 1.0: each dollar spent buys less than a dollar of planned work |
| Schedule performance index (SPI) | EV ÷ PV | Below 1.0: progress is behind the plan |
| Estimate at completion (EAC), typical case | BAC ÷ CPI | Final cost if today’s cost efficiency holds for the rest |
| Estimate to complete (ETC) | EAC − AC | What the remaining work is expected to cost |
| Variance at completion (VAC) | BAC − EAC | Negative: an overrun is expected at the end |
| To-complete performance index (TCPI) | (BAC − EV) ÷ (BAC − AC) | The efficiency the remaining work needs to finish on BAC |
Working a variance question
Step 1
Label the three inputs
Planned value (PV) is the budget for work scheduled to be done by now. Earned value (EV) is the budget for work actually done. Actual cost (AC) is what was spent. Stems often describe them in words, in any order, so put a label on every figure before touching a formula.
Step 2
Start every formula from EV
Both variances and both indexes put EV first. Subtract or divide, then read the sign: a minus, or a figure under 1.0, is the unfavorable result.
Step 3
Check one example by hand
With PV of $75,000, EV of $66,000 and AC of $60,000, CV is +$6,000 and CPI is 1.10, while SV is −$9,000 and SPI is 0.88. The project is under budget and behind schedule at the same time, and that combination is normal.
Step 4
Answer what was asked
Some stems want the number, others want its meaning, the next action or who to tell. A correctly computed index attached to the wrong action is still the wrong option. The formulas fit on an index card; the reading is where points are lost.
Cards on this topic
Keep a calculator within reach. Every option carries a note on where its arithmetic or its reading goes wrong.
Practice cards here are written for study, not taken from PMI. The real CAPM mixes multiple choice with drag-and-drop, hot spot, comic-strip and video items.
Card 01 of 18 · 0 done · 0 right
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Card 01 of 18
A project’s cost baseline is $900,000, which includes $60,000 of contingency reserve. Management has set aside a further $40,000 as management reserve. What is the total project budget?
Note on A
$880,000 removes the contingency reserve, which belongs inside the cost baseline, before adding management reserve.
Note on B
$1,000,000 adds the contingency reserve a second time, even though it is already part of the cost baseline.
Note on C
$900,000 is the cost baseline alone and leaves out management reserve.
Note on D
Correct: The total project budget is the cost baseline ($900,000, which already includes contingency) plus management reserve ($40,000), or $940,000.
Card 02 of 18
A project manager sums the approved work package cost estimates and their contingency reserves, time-phased across the schedule. What does this produce?
Note on A
Correct: Approved work package estimates plus their contingency reserves, time-phased, form the cost baseline used to measure cost performance.
Note on B
The project budget adds management reserve on top of the cost baseline.
Note on C
The basis of estimates documents how estimates were made; it is not a time-phased total.
Note on D
The cost management plan describes how costs will be planned and controlled, not the time-phased sum.
Card 03 of 18
A project manager compares the actual cost of each completed work package with its budgeted cost in the cost baseline to find exactly where overruns occurred. Which data analysis technique is this?
Note on A
Alternatives analysis compares different options for doing the work.
Note on B
Correct: Variance analysis compares actual results with the baseline to find where and by how much the work deviated.
Note on C
Trend analysis looks at performance over time to forecast results, not at where an overrun occurred.
Note on D
Reserve analysis checks how much contingency or management reserve remains.
Card 04 of 18
A project has earned value of $120,000 and actual cost of $150,000. How much value is being earned for each dollar spent?
Note on A
-$30,000 is the cost variance (EV minus AC), a dollar amount rather than value per dollar spent.
Note on B
$1.25 inverts the formula by dividing actual cost by earned value.
Note on C
$0.20 is the shortfall per dollar (1 minus CPI), not the value earned.
Note on D
Correct: CPI = EV / AC = 120,000 / 150,000 = 0.80, so the project earns $0.80 of value for each dollar spent.
Card 05 of 18
A project reports Earned Value (EV) of $240,000, Actual Cost (AC) of $260,000, and Planned Value (PV) of $220,000. Using CV = EV - AC and SV = EV - PV, what are the cost variance and schedule variance?
Note on A
CV is negative, but SV = 240,000 - 220,000 is positive, not negative.
Note on B
Correct: CV = 240,000 - 260,000 = -$20,000 (over budget) and SV = 240,000 - 220,000 = +$20,000 (ahead of schedule).
Note on C
SV is positive, but CV is negative because actual cost exceeds earned value.
Note on D
Both signs are reversed: actual cost is above earned value, and earned value is above planned value.
Card 06 of 18
A project has spent $250,000 to date. The planned budget for the work scheduled by now is $230,000, and the work actually completed at approved budget rates is worth $200,000. Which amount represents earned value?
Note on A
Correct: Earned value is the budgeted value of the work actually completed, here $200,000.
Note on B
Earned value is not an average of other figures; it is the budgeted worth of completed work.
Note on C
$250,000 is actual cost, what was spent, not the value of work performed.
Note on D
$230,000 is planned value, the budget for work scheduled by now.
Card 07 of 18
A project is 95 percent complete by budgeted value and reports an SPI of 0.92. Its remaining work consists of a single final deliverable that cannot start until the current task finishes. Why should the SPI be interpreted with caution?
Note on A
SPI uses all earned and planned value, not only critical path activities.
Note on B
Correct: SPI compares earned value with planned value, so it can look nearly normal while the single remaining critical deliverable still drives a late finish.
Note on C
SPI does not depend on CPI; it is calculated from earned and planned value alone.
Note on D
SPI measures schedule performance; it is CPI that measures cost efficiency.
Card 08 of 18
A project has a budget at completion (BAC) of USD 500,000. To date, the team has completed work valued at USD 200,000 (EV) and has spent USD 250,000 (AC). The project manager expects the current cost efficiency to continue for the remainder of the project. What is the estimate at completion (EAC)?
Note on A
650,000 does not follow from the stated assumption; with a CPI of 0.80 the forecast is 625,000.
Note on B
550,000 assumes the remaining work will run on budget, which contradicts the assumption that current efficiency continues.
Note on C
500,000 assumes no further overrun and ignores the overrun already incurred.
Note on D
Correct: CPI = 200,000 / 250,000 = 0.80, and EAC = BAC / CPI = 500,000 / 0.80 = 625,000 when current efficiency continues.
Card 09 of 18
Given AC = $100,000, CPI = 0.8, and SPI = 1.2, what are the EV and PV, and what is the schedule variance?
Note on A
EV = AC x CPI = $80,000, not $120,000; this answer multiplies by SPI instead.
Note on B
EV and PV are right, but SV = EV - PV is +$13,333, which an SPI above 1.0 confirms.
Note on C
Correct: EV = 100,000 x 0.8 = $80,000, PV = EV / SPI = $66,667, and SV = EV - PV = +$13,333.
Note on D
EV does not equal AC when CPI is 0.8, so this answer ignores the cost index.
Card 10 of 18
During planning, the team develops an approximation of the money needed for each work package, stated as a range such as −5% to +10%. Which process is the team performing?
Note on A
Control Costs monitors spending against the baseline during execution; it does not create the first estimates.
Note on B
Determine Budget aggregates estimates into a time-phased baseline after the estimates exist.
Note on C
Plan Cost Management sets how costs will be estimated and controlled, not the estimates themselves.
Note on D
Correct: Estimating costs produces an approximation of the money each work package needs, often stated with a range of accuracy.
Card 11 of 18
A project has a budget at completion of $1,200,000 and reports 90% of the work complete. Earned value is $1,080,000, and planned value equals the full budget of $1,200,000. What is the schedule performance index, and why is it a weak indicator of schedule risk at this stage?
Note on A
SPI does not keep falling; as the remaining work is earned it moves toward 1.0.
Note on B
1.11 inverts the formula (PV / EV); SPI = EV / PV = 0.90.
Note on C
SPI is a schedule measure, so it says nothing about the budget.
Note on D
Correct: SPI = 1,080,000 / 1,200,000 = 0.90, and because EV approaches BAC as the work finishes, SPI drifts to 1.0 even if the project is late.
Card 12 of 18
A manufacturing project has recorded the following metrics at the halfway point: a Budget at Completion (BAC) of 1,000 USD, an Earned Value (EV) of 500 USD, and an Actual Cost (AC) of 400 USD. The project sponsor asks for a revised final cost estimate. Assuming the current cost performance anomalies will persist at the exact same rate until the project finishes, calculate the Estimate at Completion (EAC).
Note on A
1,100 adds the favorable cost variance to the budget, which moves the forecast in the wrong direction.
Note on B
1,250 inverts CPI, using AC / EV = 0.80 instead of EV / AC = 1.25.
Note on C
1,500 assumes a large overrun even though the project is spending less than it earns.
Note on D
Correct: CPI = 500 / 400 = 1.25, so EAC = BAC / CPI = 1,000 / 1.25 = 800.
Card 13 of 18
A project has a budget at completion of $1,250,000, earned value of $500,000, and actual costs of $625,000. Management assumes that the cost performance observed to date will continue for all remaining work. What is the estimate at completion?
Note on A
Correct: CPI = 500,000 / 625,000 = 0.80, so EAC = 1,250,000 / 0.80 = 1,562,500 when current efficiency continues.
Note on B
Multiplying BAC by CPI lowers the forecast, which is backward when the project is over budget.
Note on C
Adding the remaining budgeted work to actual cost assumes future work runs on budget, not that current efficiency continues.
Note on D
Keeping the original budget ignores the overrun already recorded.
Card 14 of 18
A project manager forecasts the estimate at completion using EAC = BAC / CPI. Senior management has just approved a major scope reduction and a new fixed-price contract covering all remaining work, so historical cost efficiency no longer reflects what the remaining work will cost. What is the primary weakness of the forecast that was presented?
Note on A
BAC / CPI does not double-count actual costs; it scales the whole budget by current efficiency.
Note on B
Correct: BAC / CPI assumes past cost efficiency continues, which no longer holds once the scope and contract terms for the remaining work have changed.
Note on C
The forecast uses the approved budget; the weakness is its assumption about future efficiency.
Note on D
BAC / CPI is a cost forecast and is not meant to include schedule variance.
Card 15 of 18
A project with a planned duration of 40 weeks has a Schedule Performance Index (SPI) of 0.8. Assuming the current schedule efficiency continues, what is the forecast duration? Use Forecast duration = (Planned duration) / SPI.
Note on A
32.0 weeks comes from multiplying by SPI, but an SPI below 1.0 means the project will take longer, not shorter.
Note on B
62.5 weeks divides by SPI twice and overstates the delay.
Note on C
Correct: 40 / 0.8 = 50 weeks, because the team is achieving only 80 percent of the planned schedule rate.
Note on D
44.5 weeks has no basis in the formula and understates the effect of an SPI of 0.8.
Card 16 of 18
A project has a Budget at Completion (BAC) of $1,200,000 and an Estimate at Completion (EAC) of $1,350,000. Using VAC = BAC - EAC, what is the variance at completion and what does it mean?
Note on A
Correct: VAC = 1,200,000 - 1,350,000 = -150,000; a negative VAC means the project is forecast to finish over budget.
Note on B
The sign is wrong: subtracting a larger EAC from BAC gives a negative number.
Note on C
A negative VAC signals an overrun, not an underrun.
Note on D
The sign is wrong, and these figures do not show the project finishing under budget.
Card 17 of 18
A project has an earned value of $480,000, actual costs of $600,000, and a planned value of $500,000. The sponsor wants to understand the cost efficiency of the work performed to date. What is the cost performance index and what does it indicate?
Note on A
0.83 divides planned value by actual cost instead of earned value by actual cost.
Note on B
Correct: CPI = EV / AC = 480,000 / 600,000 = 0.80, so the project earns $0.80 per dollar spent and is over budget.
Note on C
0.96 is EV / PV, which is the schedule performance index, not CPI.
Note on D
1.25 inverts the formula (AC / EV), so its interpretation is also wrong.
Card 18 of 18
A project has a budget at completion of $500,000, earned value of $200,000, and actual costs of $250,000. The sponsor insists that the original budget must still be met. What is the to-complete performance index for the remaining work?
Note on A
0.83 inverts the ratio; TCPI divides the remaining work by the remaining funds, not the other way around.
Note on B
Dividing the total budget by earned value is not the TCPI formula.
Note on C
Correct: TCPI = (BAC - EV) / (BAC - AC) = 300,000 / 250,000 = 1.20, so each remaining dollar must deliver $1.20 of value to meet the budget.
Note on D
0.80 is the current CPI, not the efficiency needed on the remaining work.
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After the board
The practice test mixes these cards with every other topic, and its cost and schedule variance filter narrows it to this one. For drilling the formulas themselves, the CAPM flashcards include the EVM set. Adaptive projects track progress differently, with completed work rather than a cost baseline; that side starts on agile fit and frameworks.
Sources
- PMI CAPM Examination Content Outline, 2023 Exam Update www.pmi.org — Domain II, Predictive, Plan-Based Methodologies, weighted 17%; task 2.3 covers predictive controls and cost and schedule variances. Checked October 30, 2026.