PMP - Math Formulae & Important Points

1. Cost Variance, CV = (Earned Value - Actual Cost) EV-AC

2. Schedule Variance, SV = (Earned Value - Planned Value) EV - PV
3. Cost Performance Index, CPI = EV/AC
4. Schedule Performance Index, SPI = EV/PV
BAC = Budget at Completion
EAC = Estimate at Completion
5. EAC = AC + Bottom up ETC - When original estimate is fundamentally flawed
6. EAC = BAC/Cumulative CPI - If no variances have occured and same rate of spending will continue
7. EAC = AC + (BAC - EV) - When variances are atypical / irregular
8. EAC = AC + (BAC - EV) / Cumulative CPI * Cumulative SPI - when variances are regular. Assumes
poor cost performance.
9. To-Complete Performance Index, TCPI = The cost performance to be achieved to complete the
remaining project. It is Work Remaining / Fund Remaining.
BAC - EV / BAC - AC - Based on Original Budget
BAC - EV / EAC - AC - Based on Re-estimated Budget
10. Estimate to Completion, ETC = EAC - AC
11. Variance at Completion, VAC = BAC - EAC
n
12.FV = PV(1+r)
13. Communication Channels = n(n-1)/2
14. Expected Monetary Value, EMV = P*I, Probability* Impact
15. PERT EAD = (O+4M+P)/6
16. PERT Project Duration = Sum of PERT EADs
17. Standard Deviation, = (P-O)/6
2
18. Variance of an Activity = SD
19. Standard Deviation of a Project = Square root of Var1 + Var2 + ...........
20. NPV/IRR/BCR - Bigger is better
21. Mean = Average
22. Median = Center Number / Value or average of center values
23. Mode = The most frequent number
24. Contract Incentive Savings = Target Cost - Actual Cost
25. Bonus = Savings x Percentage
26. Contract Cost = Bonus + Fees
27. Total Cost = Actual Cost + Contract Cost
28. Point of Total Assumption, PTA = (Ceiling Price - Target Price)/Buyer's Share ratio + Target Cost
------------------------Important Points

1. Strategies for Negative Risks or threats

Avoid - Eliminate the risk
Transfer - Shift the impact to a 3rd party

Mitigate - Decrease the probability or impact

Accept - Passive acceptance means no action except to document the strategy and deal with
risks as they occur. Active acceptance means to establish a contingency reserve including amounts of
money, time or resources to handle the risks.
2. Strategies for Positive Risks or opportunities
Exploit - Ensure the opportunity will be realized . For example, To exploit the opportunity, you
fast-track and crash your schedule to ensure you will launch prior to your competitor.
Share - Partner with 3rd party - Entering into a contractual agreement with another company that
can provide a key component required to get to market faster.

Enhance - Increase the probability or benefit.

Accept - Willing to take advantage of it, if it comes along but not actively pursuing it.

3. Standard Deviation, Sigma

1 - 68.26

2 - 95.46

3 - 99.73

4 - 99.99
4. Float / Slack = LS - ES / LF - EF
-------------------------------------------------------------------Early Start (ES) and Early Finish (EF) use the forward pass technique.
To determine the Early Start of an activity, factor in all its dependencies and see its earliest start date.
Consider the following simple diagram (durations are in weeks):

Click to view original size

The Early Start (ES) for Activity B is 4. Why? B comes after A. A starts on week 1 and finishes on week 3.
So the earliest that B can start is week 4. For simplicity, I think of it as: The duration of preceding activity
+1
The Early Finish (EF) is the earliest calculated time an activity can end. To calculate Early Finish, (ES for
the activity + Activity Duration) - 1. From the diagram above, we can compute the EF of activity B as [(4 +
3) - 1] = 6. Hence, the EF for Activity B is 6.
Late Start (LS) and Late Finish(LF) use the backward pass technique. You can think of backward pass
as calculating backward to see how much an activity may slide without affecting the finish date.
Late Start (LS) is the latest time an activity may begin without delaying the project duration. The simplest
way one can compute the LS is adding the float to the activity Early Start. Using the simple diagram
above, we know that Activity B is on the critical path, hence has a float of zero. Also, Activity B's ES = 4.
Hence, LS = (0 + 4) or 4. Note that if an activity has a float of zero, ES and LS will be the same.
Late Finish (LF) latest time an activity may be completedwithout delaying the project duration. One can
compute LF by LF =(Activity's LS + Activity Duration) - 1. So the LF of Activity B = (4 + 3) - 1 = 6. Note
that since activity B has a zero float, EF = LF.
For memory trigger, if the float of the activity is zero, the two starts (ES and LS) and the two finish (EF
and LF) are the same. Hence, If float of activity is zero, ES = LS and EF = LF.
----------------------------------------------------------------5. Late Start, LS = Early Start + Float
6. EF = ES + Duration -1
7. LF = LS + Duration - 1

8. SWOT - SW/ Internal , OT/ external

9. Estimates - Rough Order of Magnitude - -50% to +50%
10. Budget Estimate ----- -10% to +25%
11. Definitive Estimate ----- -5% to +10%
12. If AC is under Target Cost, Total Contract Cost = Maximum Fee + AC
13. If AC > Target Cost, use PTA.
14. Contract Types
FFP, FPIF, FP-EPA - Fixed Price
CPFF Cost Plus Fixed Fee, CPIF, CPAF, CPPC - Cost reimbursable
T&M - Time and Material
15. Deming's - PDCA - Plan-Do-Check-Act, 14-points, seven deadly diseases
16. Kaizen - Continuous Improvement
17.
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Jurans Three Basic Steps to Progress

The Three Basic Steps to Progress are broad steps that Juran feels companies must take if they are to
achieve world-class quality. The Three Basic Steps are as follows:
1.
Achieve structured improvements on a continual basis with dedication and a sense of urgency.
2.
Establish an extensive training program.
3.
Establish commitment and leadership on the part of higher management.

Jurans Ten Steps to Quality

1.
Build awareness of both the need for improvement and opportunities for improvement.
2.
Set goals for improvement.
3.
Organize to meet the goals that have been set.
4.
Provide training.
5.
Implement projects aimed at solving problems.
6.
Report progress.
7.
Give recognition.
8.
Communicate results.
9.
Keep score.
10.
Maintain momentum by building improvement into the companys regular systems.
----------------------------------------------------------------------------------------18. Feigenbaum - TQM
19. Crosby - zero defects,
20. Six Sigma - comes from concept of standard deviation
21. SEI-CMM - Capability levels are 0(Incomplete) to 5(Optimizing)
22. Continuous Process Improvement - CPI - Standardize-Do-Check-Act

23. Ishikawa's seven basic tools of quality Cause and effect diagrams, also called fish-bone or ishikawa diagrams
Control Charts - Control charts are used to determine whether a process is stable or has
predictable performance. Upper and lower specification limits are based on contract requirements. They
represent the maximum and minimum values allowed. Upper and Lower control limits are set by the
project manager and appropirate stakeholders. For repetitive processes the control limits are generally +
or - 3 Sigma.
Flowcharting

Histogram

Pareto Chart - This is a histogram ordered by frequency of Occurence of defects. Pareto's law
states that less causes produce more defects. 80/20 rule.

Run chart - Shows history and pattern of variation. Trend analysis is performed using run charts
and involves mathematical techniques to forecast outcomes based on historical results. It is used to
monitor 1. Technical Performance and 2. Cost and Schedule performance.

Scatter Diagram - Relationship between two variables.

Statistical Sampling, Inspection and Approved Change Requests Review are the other three tools and
techniques.