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PART E: THE MANAGEMENT ACCOUNTANT’S ROLE IN PROJECT IMPLEMENTATION AND…
PART E: THE MANAGEMENT ACCOUNTANT’S ROLE IN PROJECT IMPLEMENTATION AND CONTROL
:question: :explode:
MONITORING PROGRESS
:tada:
3 critical factors for monitoring progress
project iron triangle
Project cost
Project time
Project specification and quality
THE EARNED VALUE (EV) METHOD: TIME VERSUS COST
:confetti_ball:
EV = Estimated percentage completion
(the actual percentage of the project or activity that has been completed at a given point in time.)
× Budgeted cost
Cost and Schedule Variances
:!?:
Spending Variance = Cost Variance (CV) : :explode:
CV= EV − Actual Cost (AC)
Are we over budget?
Positive CV
: If
EV is greater than AC
, it means you've spent less than planned for the amount of work completed. This is good because
you're under budget.
Negative CV
: If
EV is less than AC
, it means you've spent more than planned for the amount of work completed. This
indicates you're over budget.
Schedule Variance (SV): :fire:
SV= EV − Planned Value (PV) = Budget Cost
Are we behind schedule?
Positive SV
: If
EV is greater than PV
, it means you've completed more work than planned by this point in time. This is good because
you're ahead of schedule
.
- Negative SV
: If
EV is less than PV
, it means you've completed less work than planned by this point in time. This indicates
you're behind schedule.
Performance Indices
: :forbidden:
Cost Performance Index
(CPI) = EV / AC
Schedule Performance Index (SPI) = EV / PV
Challenges
: :!!:
Accurate Data Collection
: Gathering precise data on the actual percentage completion of tasks can be challenging.
Consistent Cost Estimates
: Ensuring that the actual costs (AC) are compared to a meaningful and accurate budget or cost estimate.
Complexity in Large Projects
: For large projects, breaking down tasks and calculating EV for each can be time-consuming and complex.
Irregular Cost Incurment
: Costs may not be incurred evenly, making it difficult to estimate EV accurately.
Interpreting Variances
: Understanding and acting on cost and schedule variances can be difficult, especially if the project environment is dynamic.