This guide covers:
Formula
Meaning
Why it is used (Purpose)
Real project relevance

1. Earned Value Management (EVM) Formulas

EVM helps you understand cost, schedule, and performance in one unified system.

1. Planned Value (PV)

Formula: PV = Planned % Complete × BAC
Use: To know how much work should have been completed.
Why: Helps compare planned progress vs. actual progress.

2. Earned Value (EV)

Formula: EV = Actual % Complete × BAC
Use: Shows the value of work actually completed.
Why: Helps measure real project achievement.

3. Actual Cost (AC)

Formula: Total cost spent so far
Use: Tracks actual money spent.
Why: Essential to compare cost performance.

4. Cost Variance (CV)

Formula: CV = EV – AC
Use: Measures cost performance.
Why:

• Positive CV = under budget

• Negative CV = over budget

5. Schedule Variance (SV)

Formula: SV = EV – PV
Use: Measures schedule performance.
Why:

• Positive = ahead of schedule

• Negative = behind schedule

6. Cost Performance Index (CPI)

Formula: CPI = EV ÷ AC
Use: Shows cost efficiency.
Why: CPI < 1 means cost overrun.

7. Schedule Performance Index (SPI)

Formula: SPI = EV ÷ PV
Use: Shows schedule efficiency.
Why: SPI < 1 means delays.

8. Budget at Completion (BAC)

Use: Total budget for the project.
Why: Baseline for forecasting & performance tracking.

9. Estimate at Completion (EAC)

Formula 1: EAC = BAC ÷ CPI
Use: Forecast future cost.
Why: Predicts total project cost considering performance issues.

Additional EAC variations:

• EAC = AC + (BAC – EV) (When past variances won’t repeat)

• EAC = AC + (Remaining Work ÷ (CPI × SPI)) (When schedule & cost both impact outcomes)

• EAC = AC + Bottom-up ETC (When re-estimating accurately)

10. Estimate to Complete (ETC)

Formula: ETC = EAC – AC
Use: Remaining budget required.
Why: Helps plan future spending.

11. Variance at Completion (VAC)

Formula: VAC = BAC – EAC
Use: Predicts cost difference at project end.
Why: Positive VAC = under budget forecast.

12. To-Complete Performance Index (TCPI)

Formula: (For BAC)
TCPI = (BAC – EV) ÷ (BAC – AC)
Use: Efficiency needed to meet BAC.
Why: Tells whether the project can “recover.”

2. Project Selection / Financial Formulas

Used in business cases, feasibility studies, and project approvals.

13. Benefit-Cost Ratio (BCR)

Formula: BCR = Benefits ÷ Costs
Use: Compare cost vs benefits.
Why: Choose projects with highest benefit.

14. Net Present Value (NPV)

Use: Sum of discounted cash flows.
Why: Higher NPV = better long-term value.

15. Internal Rate of Return (IRR)

Use: Rate at which NPV = 0.
Why: Higher IRR = better return on investment.

16. Payback Period

Use: Time required to recover investment.
Why: Helps compare short-term vs long-term benefits.

3. Communication & Stakeholder Formulas

17. Communication Channels

Formula: Channels = n (n – 1) ÷ 2
Use: Shows number of possible communication paths.
Why: More people = more complexity = need better communication planning.

4. Risk Management Formulas

18. Expected Monetary Value (EMV)

Formula: EMV = Probability × Impact
Use: Quantify risk in dollars.
Why: Helps in decision trees & contingency reserves.

19. Risk Score (Qualitative)

Formula: Risk Score = Probability × Severity
Use: Prioritize risks.
Why: High score = needs proactive management.

5. Critical Path & Estimation Formulas

20. PERT Estimate

Formula: (O + 4M + P) ÷ 6
Use: Weighted estimate based on uncertainty.
Why: Gives a more realistic time duration.

21. Standard Deviation (SD)

Formula: (P – O) ÷ 6
Use: Measures uncertainty in activity duration.
Why: Helps calculate confidence levels.

22. Activity Variance

Formula: SD²
Use: Helps determine project schedule risk.
Why: High variance = higher risk.

6. Resource & Productivity Metrics

23. Resource Utilization

Formula: Actual Hours Worked ÷ Available Hours
Use: Tracks staff efficiency.
Why: Prevents overloading or under-utilizing teams.

24. Productivity

Formula: Output ÷ Input
Use: Measures efficiency of work.
Why: Helps improve performance & reduce waste.

7. Cost of Quality (COQ)

25. Cost of Quality

Formula: Prevention + Appraisal + Failure Costs
Use: Understand the cost of delivering quality.
Why: Shows why investing in quality early saves money later.

Why PMP® Formulas Are Important

Understanding formulas helps you:
Make accurate cost & schedule decisions
Identify variances early
Improve forecasting accuracy
Communicate performance with data
Prioritize risks mathematically
Pass PMP exam numerical questions quickly

Formulas simplify complex project realities into clear, actionable insights.

Final Thoughts

These 25 formulas represent over 90% of the mathematical concepts used in the PMP exam and real-world project performance analysis. By mastering them, you enhance your ability to manage cost, schedule, risk, communication, and overall project success.

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