Earned Value Management Explained for the PMP Exam

Earned value management (EVM) answers two questions with one set of numbers: are we getting the planned work done, and are we paying what we expected for it? It ties scope, schedule, and cost together.

This guide uses one running example throughout. Once you know the base numbers, every other metric is simple arithmetic. For the rest of the exam formulas (PERT, float, EMV, communication channels, NPV), see the PMP formulas cheat sheet.

The Four Inputs in Plain Language

Everything in EVM starts from four values. Three are measured at a status date; one is fixed at planning time.

BAC (Budget at Completion): the total approved budget for the work. It is the end point of your cost baseline.
PV (Planned Value): how much work, in budget dollars, you planned to have finished by the status date. Think "where the plan says we should be."
EV (Earned Value): how much work, in budget dollars, you actually finished by the status date. Calculate it as EV = % complete × BAC. Think "the budgeted value of what we really got done."
AC (Actual Cost): what you actually spent to get that work done. Think "what the invoices and timesheets say."

The key idea: PV and EV are both measured in budgeted dollars, so comparing them tells you about schedule. EV and AC describe the same finished work, so comparing them tells you about cost.

The Running Example

A team is building an internal reporting system.

BAC: $200,000
Planned duration: 10 months, with budget planned evenly at $20,000 per month
Status date: end of month 4
Physical progress: 35% of the total work is complete
Spending to date: $87,500

Now compute the three status values.

PV = 4 months × $20,000 = $80,000
EV = 35% × $200,000 = $70,000
AC = $87,500 (given)

Read the story first: we planned $80,000 of work, finished $70,000 of it, and paid $87,500. We are behind and over budget. Every metric below quantifies that.

Variances: CV and SV

Variances express the gap in dollars. Both formulas start with EV.

CV = EV - AC
SV = EV - PV

For the example:

CV = $70,000 - $87,500 = -$17,500
SV = $70,000 - $80,000 = -$10,000

Sign convention: negative is bad, positive is good, zero is on plan. A CV of minus $17,500 means the completed work cost $17,500 more than it was budgeted to cost. An SV of minus $10,000 means we have finished $10,000 less work than planned by this date.

SV is measured in dollars, not days: it shows missing planned work value, not weeks of delay.

Indices: CPI and SPI

Indices express the same gaps as ratios, which makes projects of different sizes comparable. Again, EV is always the numerator.

CPI = EV / AC
SPI = EV / PV

For the example:

CPI = $70,000 / $87,500 = 0.80
SPI = $70,000 / $80,000 = 0.875

Interpretation: above 1.0 is good, below 1.0 is bad. A CPI of 0.80 means we get 80 cents of planned work for every dollar spent. An SPI of 0.875 means we are progressing at 87.5% of the planned rate.

A rough schedule forecast is 10 months / 0.875 ≈ 11.4 months. Treat it as a signal only: SPI uses dollars, ignores the critical path, and drifts back toward 1.0 at the end of a late project because EV eventually equals PV. Check the critical path for real dates.

Also compare percent spent (AC / BAC = 43.75%) with percent complete (EV / BAC = 35%): almost 44% of the budget has delivered 35% of the work.

Forecasts: EAC, ETC, VAC, and TCPI

Forecasts look forward: if things continue a certain way, where will we finish?

EAC: Estimate at Completion

EAC is the expected total cost at the end. The right formula depends on what you believe about the future, which is exactly what exam questions test.

Situation described in the question	Formula	Example result
Current cost performance is typical and will continue	`EAC = BAC / CPI`	$200,000 / 0.80 = $250,000
The variance was a one-time event (atypical); the rest will go as budgeted	`EAC = AC + (BAC - EV)`	$87,500 + $130,000 = $217,500
Both cost and schedule performance will keep influencing the remaining work (for example, a fixed deadline forcing overtime)	`EAC = AC + (BAC - EV) / (CPI × SPI)`	$87,500 + $130,000 / 0.70 ≈ $273,214
The original estimate is no longer valid; the team re-estimates the remaining work	`EAC = AC + bottom-up ETC`	$87,500 + $150,000 = $237,500

Working for the third row: CPI × SPI = 0.80 × 0.875 = 0.70, then $130,000 / 0.70 = $185,714, then $87,500 + $185,714 = $273,214. For the fourth row, assume the team produced a fresh estimate of $150,000 for the remaining work.

If a question gives you no clue about the future, BAC / CPI is the usual default.

ETC: Estimate to Complete

ETC is how much more you expect to spend from today.

ETC = EAC - AC
With the typical EAC: ETC = $250,000 - $87,500 = $162,500

Check: remaining work BAC - EV = $130,000 at a CPI of 0.80 costs $130,000 / 0.80 = $162,500.

VAC: Variance at Completion

VAC is how far over or under budget you expect to finish.

VAC = BAC - EAC
VAC = $200,000 - $250,000 = -$50,000

Same sign convention as CV: negative means a projected overrun. If current performance continues, the project needs $50,000 more than approved.

TCPI: To-Complete Performance Index

TCPI flips the question: what CPI must we achieve on the remaining work to hit a target? It is remaining work divided by remaining money.

To finish on the original budget: TCPI = (BAC - EV) / (BAC - AC)
To finish on an approved new EAC: TCPI = (BAC - EV) / (EAC - AC)

For the example, to BAC:

TCPI = ($200,000 - $70,000) / ($200,000 - $87,500) = $130,000 / $112,500 ≈ 1.16

We have run at 0.80 so far and would need to run at 1.16 for the rest of the project. That is a big jump. In practice, a TCPI well above the current CPI means the original budget is very unlikely to hold, and the PM should talk to the sponsor about a revised EAC, scope reduction, or using reserves through the change process.

If the sponsor approves the bottom-up EAC of $237,500:

TCPI = $130,000 / ($237,500 - $87,500) = $130,000 / $150,000 ≈ 0.87

That target is close to current performance, so it is realistic. One useful check: TCPI against the typical EAC (BAC / CPI) always equals the current CPI, because that EAC already assumes current efficiency continues. Here, $130,000 / $162,500 = 0.80.

Reading TCPI: above 1.0 means you must work more efficiently than planned; below 1.0 means you have slack.

Interpretation Table: What the PM Should Do

The exam wants the response that fits the combination.

CPI	SPI	What it means	Typical PM response
Above 1	Above 1	Under budget and ahead of schedule	Confirm the data and estimates are sound (padded estimates or misreported progress can cause this). Check quality was not cut. Consider whether reserves or funding can be released.
Above 1	Below 1	Spending less, but behind schedule	Often a sign of under-resourcing or delayed starts. Analyze the critical path; consider crashing (adding resources, which raises cost) or fast tracking (which adds risk).
Below 1	Above 1	Ahead of schedule, but paying for it	Possibly overtime or premium resources. Check whether the pace is necessary; slow spending if the schedule allows, and review productivity and estimates.
Below 1	Below 1	Over budget and behind schedule	Find root causes, update forecasts (EAC, TCPI), review risks and reserves, and present options to the sponsor through the change process. Do not hide the variance.
About 1	About 1	On plan	Keep monitoring; check that EV is measured honestly and that trends are stable.

Our example sits in the bottom-left case: CPI 0.80 and SPI 0.875. The right next step is analysis and transparent reporting, not quietly asking the team to "work harder."

Common Traps

Mixing up EV and PV. PV is the plan; EV is what was done. A useful memory hook: EV is Earned, so it only grows when work is actually completed. If a question says "the project should have completed 50% of the work," that is PV. If it says "the team has completed 40%," that drives EV.

Flipping the signs or ratios. Every variance and index puts EV first: EV - AC, EV - PV, EV / AC, EV / PV. If you get CPI = 1.25 on a project that is clearly over budget, you divided the wrong way. VAC is the exception that starts with BAC: BAC - EAC.

Picking the wrong EAC. Read for the cue. "Expected to continue," "typical," or no cue at all points to BAC / CPI. "One-time," "will not recur," or "atypical" points to AC + (BAC - EV). "Must still meet the deadline" or "both cost and schedule" points to the CPI times SPI version. "Original estimate was flawed" points to a bottom-up ETC.

Measuring progress by money spent. Spending 50% of the budget does not mean 50% of the work is done. EV must come from physical progress, not from AC.

EVM in Agile and Hybrid Projects

Agile teams rarely run classic EVM, but the same idea, comparing planned progress with delivered work and cost, shows up in other forms.

Release burnup charts. A burnup plots completed story points over time against a total scope line. The gap between the completed line and the expected trajectory plays the role of SV. If the scope line rises, you can see scope growth directly, which a burndown can hide.

AgileEVM (high level). Some teams translate story points into EVM terms for a release:

BAC is the release budget.
Planned percent complete is the share of planned sprints finished.
Actual percent complete is completed story points divided by total planned points.
PV = planned % complete × BAC, EV = actual % complete × BAC, and AC is the actual spend so far.

Small example: a release has a $400,000 budget, 200 planned points, and 10 sprints. After 4 sprints, the team has completed 70 points and spent $160,000.

PV = 40% × $400,000 = $160,000
EV = (70 / 200) × $400,000 = 35% × $400,000 = $140,000
CPI = $140,000 / $160,000 = 0.875 and SPI = $140,000 / $160,000 = 0.875

The interpretation is the same, but the agile response usually involves the product owner and team: reprioritize the backlog, discuss release scope, and inspect velocity trends.

In hybrid projects, expect EVM on the predictive parts and burnups or flow metrics on the agile parts.

How PMP Questions Frame EVM

Most EVM questions are not pure arithmetic. They tend to fall into a few patterns:

Interpret a value: "The CPI is 0.9 and the SPI is 1.1. What does this indicate?" You need to read the combination correctly.
Choose the next action: "The project is over budget and behind schedule. What should the project manager do next?" Expect answers like analyzing the root cause, updating forecasts, or reviewing with the sponsor before taking corrective action. Answers that skip analysis, hide the variance, or go straight to cutting scope without approval are usually wrong.
Pick the right forecast: the scenario describes whether the variance will continue, then asks for EAC or ETC.
Assess feasibility: a TCPI well above 1.0 signals an unrealistic budget.

When a calculation is required, write down BAC, PV, EV, and AC first. Most errors come from misreading which number is which.

Quick Review

PV is planned work, EV is completed work, both in budgeted dollars; AC is actual spend; BAC is the total budget.
CV = EV - AC and SV = EV - PV: negative is bad.
CPI = EV / AC and SPI = EV / PV: below 1.0 is bad.
EAC = BAC / CPI when performance is typical; AC + (BAC - EV) when the variance was one-time; AC + (BAC - EV) / (CPI × SPI) when both indices matter; AC + bottom-up ETC when estimates were flawed.
ETC = EAC - AC, VAC = BAC - EAC.
TCPI is the efficiency needed on remaining work; well above 1.0 means the target is unlikely.
In the example: CV minus $17,500, SV minus $10,000, CPI 0.80, SPI 0.875, typical EAC $250,000, VAC minus $50,000, TCPI to BAC about 1.16.
Exam questions usually ask what the numbers mean and what to do next: analyze the root cause, update forecasts, and report transparently.