EAC, the estimate at completion, answers one question: based on what has happened so far, what will this project cost in the end?
The PMP exam uses four EAC formulas. Getting the arithmetic right is easy. Choosing the right formula is where candidates lose points, because the question tells you which one to use through the story, not the numbers.
The four formulas
| Situation in the question | Formula |
|---|---|
| Current cost performance will continue | EAC = BAC ÷ CPI |
| The variance was a one-off; the rest goes to plan | EAC = AC + (BAC − EV) |
| Both cost and schedule performance will continue | EAC = AC + (BAC − EV) ÷ (CPI × SPI) |
| The original estimate is no longer valid | EAC = AC + bottom-up ETC |
Where:
- BAC (budget at completion) is the total approved budget.
- EV (earned value) is the budgeted value of the work actually done.
- AC (actual cost) is what has been spent on that work.
- CPI (cost performance index) = EV ÷ AC.
- SPI (schedule performance index) = EV ÷ PV.
One project, four answers
A company is building a new warehouse system.
- BAC = $500,000
- PV = $180,000
- EV = $150,000
- AC = $200,000
So CPI = 150,000 ÷ 200,000 = 0.75, and SPI = 150,000 ÷ 180,000 = 0.83.
The project is over budget and behind schedule. Now watch how the forecast changes with the story.
1. "The team expects current performance to continue"
EAC = BAC ÷ CPI = 500,000 ÷ 0.75 = $666,667
This is the default. If the question gives you a CPI and says nothing about the cause of the variance, use this one.
2. "The overrun was caused by a one-time supplier problem"
EAC = AC + (BAC − EV) = 200,000 + (500,000 − 150,000) = $550,000
The past cannot be undone, so AC stays. But the remaining work, BAC − EV, is expected to cost exactly what was budgeted.
Words that point here: atypical, one-time, will not recur, isolated, the remaining work will be performed at the budgeted rate.
3. "The sponsor insists on the original end date"
EAC = AC + (BAC − EV) ÷ (CPI × SPI)
CPI × SPI = 0.75 × 0.833 = 0.625, so EAC = 200,000 + 350,000 ÷ 0.625 = 200,000 + 560,000 = $760,000
When you are both over budget and late, catching up on schedule usually costs even more money. This formula captures that, which is why it gives the highest forecast.
Words that point here: both cost and schedule, a fixed deadline, schedule pressure, the project must still finish on time.
4. "The original estimates were badly wrong; the team re-estimated the remaining work at $420,000"
EAC = AC + bottom-up ETC = 200,000 + 420,000 = $620,000
When the plan itself is flawed, past performance is not a useful predictor. You re-estimate the remaining work from the bottom up.
Words that point here: the original estimate was flawed, assumptions are no longer valid, the team re-estimated, a new estimate to complete.
The formulas that come with EAC
Once you have EAC, three more numbers follow.
ETC (estimate to complete) = EAC − AC How much more you will spend. In case 1: 666,667 − 200,000 = $466,667.
VAC (variance at completion) = BAC − EAC How far over or under budget you will finish. In case 1: 500,000 − 666,667 = −$166,667. Negative means over budget.
TCPI (to-complete performance index) The cost efficiency you need from now on to hit a target:
- To finish on the original budget: TCPI = (BAC − EV) ÷ (BAC − AC) = 350,000 ÷ 300,000 = 1.17
- To finish on an approved new EAC: TCPI = (BAC − EV) ÷ (EAC − AC)
A TCPI of 1.17 means the team must deliver $1.17 of value for every dollar spent from now on. When TCPI is well above 1, the original budget is usually no longer realistic.
Three traps
- Using BAC ÷ CPI by reflex. Always read the cause of the variance first. "One-time" changes the answer.
- Forgetting AC in the other three formulas. Money already spent stays spent.
- Using the BAC version of TCPI after a new EAC is approved. Look for "approved", "revised" or "new target" in the question.
Practice
The exam rarely asks you to calculate EAC on its own. It asks you to read a short story about a vendor failure, a flawed estimate or a fixed deadline, and pick the forecast that fits. For all the other formulas, see the PMP formulas cheat sheet. For the earned value basics behind EAC, read earned value management explained.
Then test yourself on questions written this way in the free 30-question PMP quiz.