CAPM Exam & PMP Exam Study Notes:
All Mathematical Formulas & Equations
Written By: Alvin the PM | Last Updated: June 12, 2021
Topic: CAPM Exam & PMP Exam Certification Study Notes
Listed below are my CAPM Exam & PMP Exam Study Notes for all Mathematical Formulas and Equations that I’ve used to pass my own CAPM Exam, and which I also intend to use for my 2021 PMP Exam Preparation.
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Please Note: These notes are meant to be a supplementary aid, and not as your primary study material for your CAPM Exam and/or PMP Exam. This is meant to help clarify any confusing topics and explain the most challenging concepts which are difficult to understand & remember. Please reference your own Exam Prep Book or your PMBOK Guide for further detail.
I’ve listed the Formula & Equation below, as outlined below:
1) Formula/Equation
2) Reference Section & Page in PMBOK 6th Edition
3) Explanation of each Variable
4) Key Concepts & Helpful Exam Prep Information
Communication Formulas
Communication Channels Equation
# of Communication Channels = [n*(n – 1)] / 2
WHAT DOES EACH VARIABLE MEAN?
n = number of stakeholders on the team, and this should include the project manager as well
Estimation Formulas
#1: Three-Point Estimation Formula (also known as Triangular Distribution)
Estimate = (Optimistic + Most Likely + Pessimistic) / 3
– Pg 201, PMBOK 6th Edition
– Use for Scheduling and Cost Estimates
#2: PERT Estimation Formula (“Beta Distribution”)
Estimate = (Optimistic + 4*Most Likely + Pessimistic ) / 6
– Pg 245, PMBOK 6th Edition
– Use for Scheduling and Cost Estimates
WHAT DOES EACH VARIABLE MEAN?
– Optimistic = What is the best-case that will occur?
– Most Likely = Realistically speaking, how long would it take/how much would it cost?
– Pessimistic = What is the worst-case estimate that would occur?
Critical Path Analysis Formulas
#1: Float Equation
Slack/Float = LS – ES or LF – EF
– Pg 210, PMBOK 6th Edition
Notes:
If Float = 0, then the activity is on the critical path
If Float < 0, then the activity is Behind Schedule!
>> A good way to remember this is to just think that a negative float is bad (bad for being behind schedule).
WHAT DOES EACH VARIABLE MEAN?
– LS = Late Start = Latest time that a task can start, without delaying its Late Finish
– ES = Early Start = Earliest time that a task can start
– LF = Late Finish = Latest time that a task can be completed, without affecting a Successor Activity
– EF = Early Finish = Earliest time that a task can finish
Earned Value Analysis Formulas
For information regarding Cost Management and other elements of Earned Value Analysis, check out the Earned Value Analysis section of Cost Management.
Variance Equations (SV, CV, VAC)
– Pg 262 – 263, PMBOK 6th Edition
#1: Schedule Variance, SV
SV = EV – PV
#2: Cost Variance, CV
CV = EV – AC
#3: Variance At Completion, VAC
VAC = BAC – EAC
WHAT DOES EACH VARIABLE MEAN?
– EV = Earned Value = The ACTUAL value for the work which has been “earned” or completed thus far.
– PV = Planned Value = The “planned” approved budget for completing the scheduled work
– AC = Actual Cost = How much was actually spent to perform the work?
– VAC = Variance At Completion = What is the difference between our Project’s Planned Cost at Completion and our New Cost Estimate?
FORMULA INTERPRETATION
#1: Schedule Variance, SV
SV < 0 means… Behind Schedule (BAD)
SV = 0 means… On Schedule (NEUTRAL)
SV > 0 means… Ahead of Schedule (GOOD)
#2: Cost Variance, CV
CV < 0 means… Over Budget (BAD)
CV = 0 means… On Budget (NEUTRAL)
CV > 0 means… Within Budget (GOOD)
#3: Variance At Completion, VAC
VAC < 0 means… Over Budget (BAD)
VAC = 0 means… On Budget (NEUTRAL)
VAC > 0 means… Within Budget (GOOD)
Alvin’s Tip for Earned Value Analysis:
Alvin the PM
Easy way to remember the interpretation is to think…
Anything NEGATIVE IS BAD!
So, if SV is -10, for example, then it is BAD because it has a negative impact on the schedule and you are behind schedule.
Similarly, if CV is -5, for example, then it is BAD because it has a negative impact on your budget, and you’ve used up too much of your funds and you are OVER BUDGET.
Index Equations (SPI, CPI, TCPI)
– Pg 263, PMBOK 6th Edition
#1: Schedule Performance Index, SPI
SPI = EV / PV
#2: Cost Performance Index, CPI
CPI = EV / AC
FORMULA INTERPRETATION
#1: Schedule Performance Index, SPI
SPI < 1 means… Behind Schedule (BAD)
SPI = 1 means… On Schedule (NEUTRAL)
SPI > 1 means… Ahead of Schedule (GOOD)
#2: Cost Performance Index, CPI
CPI < 1 means… Over Budget (BAD)
CPI = 1 means… On Budget (NEUTRAL)
CPI > 1 means… Within Budget (GOOD)
#3: To-Complete-Performance Index, TCPI
Formula #1: TCPI = (BAC – EV) / (BAC – AC)
When to use? Measuring the cost efficiency in order to complete the project per the plan
Formula #2: TCPI = (BAC – EV) / (EAC – AC)
When to use? Measuring the cost efficiency and taking into consideration the Estimate-At-Completion (EAC)
**Note: In the above two equations for TCPI, BAC is replaced with EAC in the denominator of the equation.
WHAT DOES EACH VARIABLE MEAN?
TCPI = To-Complete Performance Index = This defines how efficient we need to be in order to complete our project on budget, and is the ratio between Remaining Work to Remaining Budget
FORMULA INTERPRETATION
#1: To-Complete Performance Index, TCPI
TCPI < 1 means… Within Budget (GOOD)
This is easier to complete because we have more money left in our budget, than the Planned Value work which still remains to be completed.
TCPI = 1 means… On Budget (NEUTRAL)
The amount of remaining work is equal to the money left to finish the project.
TCPI > 1 means… Over Budget (BAD)
This is harder to complete because there is more work to be completed than the allowed Remaining Budget.
**Note: This is the only parameter where being less than 1 is a GOOD THING and corresponds to being under budget.
CPI and SPI have opposite interpretations when compared to TCPI. CPI < 1 and SPI < 1 correspond to being over budget or being behind schedule, respectively.
Estimate At Completion Equations, EAC
Formula #1: EAC = AC + BAC – EV
When to use? Use this formula if future expenses will occur at the original “planned” forecasted amount. In other words, can we use our originally planned rate to complete our future work?
Formula #2: EAC = BAC / CPI
When to use? If you believe that the rate that you are spending money can be assumed to be the same throughout the remainder of the project’s lifecycle. In other words, if the CPI value will be the same for the remaining work of the project.
Formula #3: EAC = AC + [ (BAC – EV) / (CPI*SPI) ]
When to use? If Cost and Schedule Performance Indices will BOTH impact the rest of your project’s work, then use this formula.
Formula #4: EAC = AC + Bottom-up ETC
When to use? Use this formula if the initial project plan and assumptions are no longer true & valid, and need to be re-planned. Hence, this is the reason we require a newly estimated, bottom-up ETC.
WHAT DOES EACH VARIABLE MEAN?
– BAC = Budget At Completion = This can be thought of as the Planned Overall Project Budget. How much “budget” are we planning to spend to complete the entire project?
– ETC = Estimate To Complete = How much will it cost to finish the last, remaining work of our project?
– EAC = Estimate At Completion = EAC is an Estimate for the Project’s Total Cost, given the current work which has already been performed.
Estimate To Complete Equations, ETC
Formula #1: ETC = EAC – AC
When to use? If work is going according to plan
*Note that this can be derived from Formula #4 above by moving the EAC variable to one side (EAC = AC + Bottom-up ETC)
Formula #2: ETC = Re-estimate
When to use? If you are taking a bottom-up approach
Cost Management Formulas for Budget
#1: Cost Baseline (Approved project budget)
Cost Baseline = Control Accounts
Control Accounts = Contingency Reserve + Work Package Cost Estimates
Work Package Cost Estimates = Activity Contingency Reserve + Activity Cost Estimate
Conclusion
I hope you found the above information helpful with your Project Management Exam Prep Journey! If you found this useful, please feel free to SHARE and RECOMMEND this website with a friend. My goal is to help other Project Managers pass their own CAPM and PMP Exam, and become Certified in Project Management.
Cheers, Alvin