Learning PMP Formulas

the Easy Way

A step by step process to learn the formulas
needed to pass the PMP® examination

Presented by Mark Troncone, MBA, PMP ®, CSM®

About Me – Mark Troncone
❑ PMP® Certified – Project Management Institute
❑ CRM Certified SCRUM Master® – SCRUM Alliance
❑ Certified IT Business Analyst – State of Connecticut
❑ Active career transition mentor
❑ MBA Management, BS Marketing, AS Accounting
❑ Work experience::
◼ TransAct Technologies
◼ Starwood Hotels
◼ Affinion Group
◼ Hewitt Associates
◼ Wachovia Bank
◼ Bayer Pharmaceuticals
◼ Reader’s Digest
◼ James River Corporation
Agenda

❑ The purpose of this presentation

❑ The PMP® examination and formulas
❑ The formulas you need to know for the test
❑ The formulas explained
❑ How to learn the formulas the “easy” way
❑ Test yourself – time to prepare
❑ What to do - pre-exam
❑ Your ready!
 The Purpose of this Presentation

This presentation has 3 goals:

1. To explain the formulas that you
will need to know for the PMP®
Examination

2. To give you an easy-to-learn method

to remember these formulas
3. To ensure that you can quickly
reproduce these formulas on paper
before you start the PMP® exam
The PMP® examination and formulas
Some things to know before the test:
◼ Do not get intimidated by the formulas
◼ The formulas are not hard to learn
◼ If you follow my step by step plan it’s easy
◼ With a little practice you should be able
to write them down in 5 minutes!

Let’s get started!!!!!!!!!!!!

 The Formulas You Need to Know for the Test

These are the first 5 formulas you will need to know:

Present Standard Activity PERT Communication

Value Deviation Variance (3 Point Est.) Channels
FV C P -O P -O 2 P + (4M) + O N (N – 1)
(R + 1) n 6 6 2
6
Where: Where: Where: Where: Where:
FV = Future Value P = Pessimistic Time P = Pessimistic Time P = Pessimistic Time N = Number of People
R = Interest Rate O = Optimistic Time O = Optimistic Time M = Most Likely Time
n = # of time periods O = Optimistic Time
The Formulas Explained - First 5

1. Present Value FV
(R + 1) n

 Present value means - the value today of future cash flows

FV = Future Value
R = Interest Rate
n = Number of periods
The Formulas Explained - First 5

2. Activity Standard Deviation P - O

6

 This can be used for both Time and Cost estimates

 The + or – an activities/cost range

P = Most Pessimistic Time or Cost estimate for an activity

O = Most Optimistic Time or Cost estimate for an activity
The Formulas Explained - First 5

2
3. Activity Variance P -O
6
 This can be used for both Time and Cost estimates
 Represents variances of critical path activities

P = most Pessimistic Time or Cost estimate for an activity

O = most Optimistic Time or Cost estimate for an activity

Note: Remember to Square the result which is a fancy way of

multiplying the result times itself
The Formulas Explained - First 5

4. Three Point Estimate

(PERT) P + (4M) + O
6
 This can be used for both Time and Cost estimates
 Also Known as Expected Activity Duration
 EAD + or – SD gives you a range for an individual activity
estimate ex) an activity can take 25 days + or – 3 days
P = Most Pessimistic Time or Cost estimate for an activity
M = Most Likely Time or Cost estimate for an activity
O = Most Optimistic Time or Cost estimate for an activity
The Formulas Explained - First 5

5. Communication Channels N (N – 1)
2

 This formula is used to calculate the number of

communication channels required for the number of
stakeholders. It will give an indication of how complex a
project’s communications will be.

N = Number of Stakeholders (People)

 The Formulas You Need to Know for the Test

These are the next 4 formulas you will need to know:

4 key terms you need to know before we start:
 PV = Planned Value – As of today what is the amount of work that
should be completed?
 EV = Earned Value – As of today what is the amount of work that is
actually accomplished?
 AC = Actual Cost – As of today what is the actual cost incurred for the
work accomplished
 BAC = Budget at Completion – How much did we budget for the total
project??
 The Formulas You Need to Know for the Test

These are the next 4 formulas you will need to know:

CV SV CPI SPI
Cost Schedule Cost Schedule
Variance Variance Performance Performance
Index Index

EV – AC EV – PV EV / AC EV / PV

Where: Where: Where: Where:

EV = Earned Value EV = Earned Value EV = Earned Value EV = Earned Value

AC = Actual Cost PV = Planned Value AC = Actual Cost PV = Planned Value

The Formulas Explained - Next 4

6. CV - Cost Variance EV – AC

 The difference between Earned Value and Actual Cost

 Negative value = Cost Overrun or over budget
 Positive value = on or under cost or under budget
 Are we under or over budget ➔ 1.0 or greater is good

EV = Earned Value
AC = Actual Costs
The Formulas Explained - Next 4

7. SV - Schedule Variance EV – PV

 The difference between Earned Value and Planned Value

 Negative value = behind schedule
 Positive value = on or ahead of schedule
 Are we ahead or behind schedule ➔ 1.0 or greater is good

EV = Earned Value
PV = Planned Value
The Formulas Explained - Next 4
8. CPI - Cost Performance Index EV / AC

 The ratio of Earned Value to Actual Cost

 Value < 1 = Cost over budget
 Value > 1 = Cost below budget
 How efficiently are we using our resources
 Ex) We are only getting about 89 cents out of every dollar we
put into the project – THIS IS BAD
EV = Earned Value
AC = Actual Costs
The Formulas Explained - Next 4

9. SPI - Schedule Variance EV / PV

 The ratio of Earned Value to Planned Value
 Value < 1 = behind schedule
 Value > 1 = on or ahead of schedule
 How efficiently are we using time
 Ex) We are only progressing at about 83 percent of the rate
planned – THIS IS BAD

EV = Earned Value
PV = Planned Value
 The Formulas You Need to Know for the Test

These are the next 4 formulas you will need to know:

EAC ETC TCPI VAC
Estimate at Estimate to To Complete Variance at
Completion Complete Performance Completion
Index

BAC / CPI EAC – AC BAC - EV BAC - EAC

BAC - AC
Where: Where: Where:
Where:
BAC = Budget at EAC = Estimate at BAC = Budget at
Completion Completion BAC = Budget at Completion Completion
EV = Earned Value
CPI = Cost Performance AC = Actual Cost AC = Actual Cost EAC = Estimate at
Index Completion
The Formulas Explained - Next 4

10. EAC - Estimate at Completion BAC / CPI

 The ratio of Budget at Completion to Cost Performance Index

 This formula is used if no variances from the BAC have occurred
 A forecasting formula
 or AC + (BAC – EV) calculates the actual to date plus remaining
budget – Ac plus the remaining work to perform
 As of now, how much do we expect the total project to cost

BAC = Budget at Completion

CPI = Cost Performance Index (EV / AC)
The Formulas Explained - Next 4

11. ETC - Estimate to Complete EAC - AC

 The difference between the Estimate at Completion ratio and the

Actual Costs to date
 This is a forecasting formula
 From this point on, how much more do we expect it to cost to
finish the project cost or what will the remaining work cost

EAC = Estimate at Completion

AC = Actual Cost
The Formulas Explained - Next 4
12. TCPI - To Complete BAC - EV
Performance Index BAC - AC
 The ratio of Budget at Completion to Earned Value divided by the
ratio of Budget at Completion to Actual Cost
 This formula divides the work remaining to be done by the money
remaining to do it
 Ex) By how much does our performance need to improve, in order
come on in time and on budget

BAC = Budget at Completion

EV = Earned Value
AC = Actual Cost
The Formulas Explained - Next 4

13. VAC -Variance at Completion BAC – EAC

 The difference between the Budget at Completion and
the Estimate at Completion ratio
 This is a variance formula
 Ex) As of today will we be under or over budget at the
end of the project

EAC = Estimate at Completion

BAC = Budget at Completion
The Formulas You Need to Know for the Test

These are final 3 formulas you will need to know:

EMV TOTAL PTA
Expected FLOAT Point of Total
Monetary Value Assumption

ES EF [(CP –TP) / BSR] + TC

Px I
Where:
Where:
CP = Ceiling Price
P = Probability LS LF
TP = Target Price
I = Impact LS – ES
BSR = Buyers Share Ratio
or
LF - EF TC = Target Cost
The Formulas Explained - Final 3

14. EMV - Expected Monetary Value PxI

 Used to determine the overall ranking of risks.
 A better way than evaluating just the probability or impact.

P = Probability
I = Impact
The Formulas Explained - Final 3
15. Total Float = LS - ES ES EF
Amount of Float
or LF - EF
LS LF
 Use this formula to compute float of activities
 We always begin “Late” so start each formula as LS or LF
 Used to evaluate delay or slack on activities thus determining
resource allocation
 Remember activities on the “Critical Path” almost always have zero
float

LS = Late Start ES = Early Start Note: Either formula

LF = Late Finish EF = Early Finish will get the same answer

The Formulas Explained - Final 3
16. PTA - Point of Total Assumption
[(CP –TP) / BSR] + TC
 Only applies to Fixed Price incentive fee contracts
 Refers to the amount above which the seller bears all the loss
of a cost overrun
 Costs that go above the PTA are assumed to be due to
management

CP = Ceiling Price TP = Target Price

BSR = Buys Share Ratio TC = Target Cost
How to Learn the Formulas the “Easy” Way

OK let’s put it all together….

 Get a regular piece of 8” x 11” paper
 Draw a vertical line 2” across from the left side of the paper
 Draw a horizontal line 3” down from the top of the paper
 How to Learn the Formulas the “Easy” Way
Above the horizontal line put your first 5 formula names:
PV SD SDV PERT CC
Future Standard Standard Expected Communication
Value Deviation Deviation Activity Channels
Duration
 Notice we start with the “present” - PV.
 But these are “standard” formulas, so write SD twice and take the “V” from
the first formula PV and put it at the end of your second SD to make SDV.
 Next remember to wash your hair with “PERT”
 Last, you’re tired so have a “CC” on the rocks – Communication Channels
 How to Learn the Formulas the “Easy” Way

Next write in your first 5 formulas under them:

PV SD SDV PERT CC

FV P - O P - O P - O N (N – 1)
(R + 1) n 6 6 6 2
For the first formula just know that for the Present we must know the Future divided by it’s Rate +1.
Don’t forget that the Rate + 1 result must always be taken to the n power where n = number of time
periods. Ex) if the rate was 0.1 and the number of time periods were 3 years then the result would be:

(1 + 0.1) 3 = 1.331

Notice I wrote all the SD, SDV and PERT formulas the same for now because basically they
are.
 How to Learn the Formulas the “Easy” Way

Next write in your first 5 formulas under them:

PV SD SDV PERT CC
2
FV P - O P - O P + (4M) + O N (N – 1)
(R + 1) n 6 6 6 2
For the next three formulas just know that always start out the same P – O / 6.
For SDV just square it.

For PERT remember that P-E-R-T is 4 letters, so you must have 4 pieces to the formula the P
(Pessimistic) and O (Optimistic), but have to drop the M (Most Likely) x 4 in the middle.
The name “Communication Channels” has 4 “N’s” in it and is the only formula with an N in
it – N standing for number of people always divided by 2.
How to Learn the Formulas the “Easy” Way

Above the horizontal line should look like this:

FV SD SDV PERT CC
2
FV P - O P - O P + (4M) + O N (N – 1)
(R + 1) n 6 6 6 2
 How to Learn the Formulas the “Easy” Way

Now below the horizontal line write the 4 key terms:

EV AC PV BAC

Remember:
 EV = Earned Value
 AC = Actual Cost
 PV = Planned Value
 BAC = Budget at Completion
How to Learn the Formulas the “Easy” Way

Next the inside vertical line write the next 8 formulas:

CV
SV Notice the first 4 are COST and SCHEDULE alternating starting
with “C” – COST. Do the “V” Variance before you do the “PI”
CPI Index

SPI
EAC After you know your COST and SCHEDULES you can then “E”
Estimate. Just remember “A” in EAC comes before “T” in ETC
ETC
After you Estimate you can Complete Performance. Just remember
TCPI “T” comes after “E”.

After Completing Performance, how much you will be over or under

VAC budget at the end of the project. Just remember “V” comes after “T”.
How to Learn the Formulas the “Easy” Way

Next to the first 4 formulas, write the following:

CV = EV - Notice the first 4 formulas all start with EV
SV = EV -
Variances “V” are minus
CPI = EV /
SPI = EV / Indexes “I” are divides

EAC
ETC
TCPI
VAC
How to Learn the Formulas the “Easy” Way

Now complete the next parts of the formulas:

CV = EV - AC Notice that the Cost formulas are the same the only
difference is the minus or divide signs
SV = EV - PV
CPI = EV / AC Notice that the Schedule formulas are the same the
only difference is the minus or divide signs
SPI = EV / PV
EAC For COST, “A” is closer to “C” so put in AC
ETC
For SCHEDULE, “P” is closer to “S” so put in SV
TCPI

VAC
How to Learn the Formulas the “Easy” Way

Now complete the next 2 formulas:

Notice that the first part of the EAC formula
CV = EV - AC contains BAC – both have “AC” in it. EAC has
SV = EV - PV a “C” in it – the closest formula up the chain
with a “C” in it is CPI so put it in your done.
CPI = EV / AC Remember to divide in this formula! It is the
SPI = EV / PV only one left where you have to divide.
EAC = BAC / CPI
Note: EAC can also be written as AC + (BAC –
ETC = EAC - AC EV) just a little twist but contained in CPI

TCPI For ETC, notice you must have completed EAC

before it, which becomes the first part of this
formula. The next part “AC” is contained in the
VAC first part of the formula.
How to Learn the Formulas the “Easy” Way

Now complete the last 2 formulas:

TCPI is the easiest formula of them all. Start off
CV = EV - AC by drawing a divide line and write BAC above
SV = EV - PV and below it and write 2 minus signs - you’re
50% done already! TCPI has CPI in it. Now
CPI = EV / AC look at the formula for CPI it contains EV/AC.
SPI = EV / PV Just use that to complete the formula – you’re
done!
EAC = BAC / CPI
ETC = EAC - AC For VAC use the BAC in the previous formula.
Notice VAC has “AC” in it. The closest formula
TCPI = BAC - EV up the chain that has “AC” in it is EAC. Put it
BAC - AC in the formula – you’re done!

VAC = BAC - EAC Notice each formula in the chain relies on a

previous formula that you constructed?
How to Learn the Formulas the “Easy” Way

In the middle of your page add the last 3 formulas:

EMV = P x I

FLOAT = LS - ES or LF - EF

POTA = [(CP - TP) / BSR] + TC

Note: These you will just have to know

How to Learn the Formulas the “Easy” Way

EMV = P x I EMV – Probability x Impact is easy to remember

FLOAT = LS - ES or LF - EF

ES EF FLOAT – We always start late and subtract the value

FLOAT
above it in the box. Write this box down, it may become
useful if questions are asked about coming up with a
LS LF critical path or forward or backwards path of an
activity.
How to Learn the Formulas the “Easy” Way

POTA = Point of Total Assumption

POTA = [(CP - TP) / BSR] + TC

POTA - the first half of the formula both contain “P” = PRICE.
Remember you have to jump to the “C” ceiling to hit (minus) a “T”
target. Never forget any buyer always gets his share so you have to divide
out his “BSR” Buyers Share Ratio. But costs are always around so and
you always have to add back his “TC” Target Cost
How to Learn the Formulas the “Easy” Way

Those are the formulas to know for the exam

Just remember to set up the sheet

the way I laid it out for you and
you will do fine.

Now it’s time to test yourself –

don’t get nervous, it’s easy!
 Test Yourself – Time to Prepare

 Study the formulas until you feel confident

in being able to recite them.
 Practice writing them down using my “T”
bar on a sheet of paper.
 Everyday practice writing them down 5 times.
 If you make mistakes, understand why and
correct it.
 Talk yourself through writing them down using
my formula memory method.
 Do this for two weeks at different times of the day.
 What to do - Pre-Exam

When you feel confident with knowing the formulas:

 Get an egg timer or have someone time you.
 Write down the formulas as fast as you can – start off with
15 minutes maximum.
 Initially, see how long it took you for this first attempt.
 Use this initial time as your starting point.
 Do this 5 times a day, if you make any mistakes, review the
reason(s) why.
 Every few days try to take off 1 to 2 minutes your time
 A week before the exam you should be able to write them
down in 5 minutes
Your ready!

 On the day of the exam you will be given 3 sheets of blank paper to use
for math problems.
 Before the actual exam starts on the computer you will have 15 minutes to
view a computer tutorial to become familiar with the computer commands
for the test.
 Use part of this this time to write down the formulas on one side of a
blank piece of paper
 Use this paper as your guide throughout the exam for questions
concerning formulas – it is perfectly OK to do this!!!!!
 Remember: if you need more paper you will have to turn in used sheets –
don’t worry you’ll never need more paper.
 GOOD LUCK and do not worry – you will pass !!!!!!!!!!!
 QUESTIONS
Tell me what you think

mtroncone73@yahoo.com