we need to calculate the planned value (PV), earned value (EV), and actual cost (AC) of the project at the end of the second iteration. PV is the budgeted amount of work that should have been completed by a certain point in time. EV is the value of the work that has been actually completed by a certain point in time. AC is the amount of money that has been actually spent by a certain point in time. The formulas are:
PV = (Budget at Completion / Total number of user stories) × Planned number of user stories EV = (Budget at Completion / Total number of user stories) × Actual number of user stories AC = Actual expenditure
The budget at completion (BAC) is the total value of all the user stories, which is 100 × $50 = $5,000. The planned number of user stories at the end of the second iteration is 40 (20 per iteration). The actual number of user stories delivered is 50. The actual expenditure is $2,000. Therefore:
PV = ($5,000 / 100) × 40 = $2,000 EV = ($5,000 / 100) × 50 = $2,500 AC = $2,000
To determine whether the project is on budget or not, we can compare the EV and the AC using the cost variance (CV) and the cost performance index (CPI). The formulas are:
CV = EV - AC CPI = EV / AC
If CV is positive or zero, the project is on budget or under budget. If CV is negative, the project is over budget. If CPI is greater than or equal to one, the project is on budget or under budget. If CPI is less than one, the project is over budget. In this case:
CV = $2,500 - $2,000 = $500 CPI = $2,500 / $2,000 = 1.25
Both CV and CPI indicate that the project is under budget.
To determine whether the project is on schedule or not, we can compare the EV and the PV using the schedule variance (SV) and the schedule performance index (SPI). The formulas are:
SV = EV - PV SPI = EV / PV
If SV is positive or zero, the project is on schedule or ahead of schedule. If SV is negative, the project is behind schedule. If SPI is greater than or equal to one, the project is on schedule or ahead of schedule. If SPI is less than one, the project is behind schedule. In this case:
SV = $2,500 - $2,000 = $500 SPI = $2,500 / $2,000 = 1.25
Both SV and SPI indicate that the project is ahead of schedule.
Therefore, the correct statement is that the project is under budget and on schedule.
[References:, PMBOK Guide, 6th edition, pages 267-269, 292-293, PMP Exam Questions - Part 16 (Q 151-160), YouTube video by Certify Me Now, Top 50+ PMP Exam Questions and Answers for 2024, Simplilearn article, , , ]
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