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

Readers 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.

2.

3.

To explain the formulas that you will

need to know for the PMP
Examination
To give you an easy-to-learn method
to remember these formulas
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 its easy

With a little practice you should be able

to write them down in 5 minutes!

Lets get started!!!!!!!!!!!!

The Formulas You Need to Know for the Test

These are the first 5 formulas you will need to know:
Present
Value
FV C
(R + 1)

Standard
Deviation

Activity
Variance

P -O
6

P -O
6

PERT
(3 Point Est.)
P + (4M) + O
6

Communication
Channels
N (N 1)
2

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)

Present value means - the value today of future cash flows

n

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

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
projects 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
Variance

Schedule
Variance

Cost
Performance
Index

Schedule
Performance
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
Completion

Estimate to
Complete

To Complete
Performance
Index

Variance at
Completion

BAC / CPI

EAC AC

Where:

Where:

BAC = Budget at
Completion

EAC = Estimate at
Completion

CPI = Cost Performance

Index

AC = Actual Cost

BAC - EV
BAC - AC
Where:
BAC = Budget at Completion
EV = Earned Value
AC = Actual Cost

BAC - EAC
Where:
BAC = Budget at
Completion
EAC = Estimate at
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
Expected
Monetary Value
PxI

TOTAL
FLOAT
ES

EF

I = Impact

Point of Total
Assumption
[(CP TP) / BSR] + TC
Where:

Where:
P = Probability

PTA

LS

LF

CP = Ceiling Price
TP = Target Price

LS ES
or
LF - EF

BSR = Buyers Share Ratio

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
or LF - EF

ES

EF

Amount of Float

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
LF = Late Finish EF = Early Finish

Note: Either formula

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 lets 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

Future
Value

Standard
Deviation

Standard
Deviation

PERT
Expected
Activity
Duration

CC
Communication
Channels

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, youre 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

FV
(R + 1)

P - O
6

SDV

PERT

P - O
6

P - O
6

CC
N (N 1)
2

For the first formula just know that for the Present we must know the Future divided by its Rate +1.
Dont 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:

n
= 1.331

(1 + 0.1)
3

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
FV
(R + 1)

SD
P - O
6

SDV
P - O
6

PERT
2

P + (4M) + O
6

CC
N (N 1)
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
n
(Pessimistic) and O (Optimistic), but have to drop the M (Most Likely) x 4 in the middle.
The name Communication Channels has 4 Ns 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

FV
(R + 1)

P - O
6

SDV
P - O
6

PERT

CC

P + (4M) + O

N (N 1)
2

How to Learn the Formulas the Easy Way

Now below the horizontal line write the 4 key terms:

EV

AC

PV

Remember:

EV = Earned Value
AC = Actual Cost
PV = Planned Value
BAC = Budget at Completion

BAC

How to Learn the Formulas the Easy Way

Next the inside vertical line write the next 8 formulas:
CV
Notice the first 4 are COST and SCHEDULE alternating starting
SV
with C COST. Do the V Variance before you do the PI
CPI
Index
SPI
After you know your COST and SCHEDULES you can then E
EAC
Estimate. Just remember A in EAC comes before T in ETC
ETC
After you Estimate you can Complete Performance. Just remember
T comes after E.
TCPI
VAC

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

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 SV = EV CPI = EV /
SPI
= EV /
EAC
ETC
TCPI
VAC

Notice the first 4 formulas all start with EV

Variances V are minus
Indexes I are divides

How to Learn the Formulas the Easy Way

Now complete the next parts of the formulas:
CV
SV
CPI
SPI
EAC
ETC
TCPI
VAC

=
=
=
=

EV - AC
EV - PV
EV / AC
EV / PV

Notice that the Cost formulas are the same the only
difference is the minus or divide signs
Notice that the Schedule formulas are the same the
only difference is the minus or divide signs
For COST, A is closer to C so put in AC
For SCHEDULE, P is closer to S so put in SV

How to Learn the Formulas the Easy Way

Now complete the next 2 formulas:
CV
SV
CPI
SPI
EAC
ETC
TCPI
VAC

=
=
=
=
=
=

EV - AC
EV - PV
EV / AC
EV / PV
BAC / CPI
EAC - AC

Notice that the first part of the EAC formula

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

How to Learn the Formulas the Easy Way

Now complete the last 2 formulas:
CV
SV
CPI
SPI
EAC
ETC
TCPI
VAC

=
=
=
=
=
=
=

EV - AC
EV - PV
EV / AC
EV / PV
BAC / CPI
EAC - AC
BAC - EV
BAC - AC
= BAC - EAC

TCPI is the easiest formula of them all. Start off

by drawing a divide line and write BAC above
and below it and write 2 minus signs - youre
50% done already! TCPI has CPI in it. Now
look at the formula for CPI it contains EV/AC.
Just use that to complete the formula youre
done!
For VAC use the BAC in the previous formula.
Notice VAC has AC in it. The closest formula
up the chain that has AC in it is EAC. Put it
in the formula youre done!
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

LS

LF

FLOAT We always start late and subtract the value

above it in the box. Write this box down, it may become
useful if questions are asked about coming up with a
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 its time to test yourself

dont get nervous, its 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
dont worry youll never need more paper.

GOOD LUCK and do not worry you will pass !!!!!!!!!!!

QUESTIONS
Tell me what you think
mtroncone73@yahoo.com