Managing a project can sometimes feel like handling a complex puzzle. Among the numerous terms that boggle the mind are Earned Value (EV), Planned Value (PV), and Actual Cost (AC). Today, we’re simplifying these using a child’s piggy bank. Ready? Let’s dive in!
Meet Alex and His Savings Plan
Alex is a diligent child who gets an allowance for completing his daily chores. He dreams of a new toy and, like a budding project manager, devises a plan. Every day, he aims to deposit $1 into his piggy bank. By the end of 5 days, his target is $5.
Understanding Planned Value (PV)
Definition: It’s the value of the work you expect to complete by a certain time.
In Alex’s World: By Day 5, he expects to see $5 in the piggy bank, making his PV $5.
Deciphering Actual Cost (AC)
Definition: It’s the actual money spent on the project until now.
In Alex’s World: Alas, temptations abound! Alex couldn’t resist a $2 candy. So, after 5 days, he’s spent $2 of his saved allowance, making his AC $2.
Grasping Earned Value (EV)
Definition: It’s the value of the actual work done till now.
In Alex’s World: After 5 days and post candy indulgence, Alex only has $3 in his piggy bank. Thus, his EV is $3.
Bringing It All Together
With these three metrics, we can understand:
- Behind Schedule: If Earned Value (what’s been achieved) is less than Planned Value (the target). In Alex’s case, he’s on track since he has $3 out of the planned $5.
- Ahead of Schedule: If Earned Value exceeds Planned Value.
- Over Budget: If Actual Cost (what’s been spent) surpasses Planned Value. Alex did spend more than planned on candy!
- Under Budget: If Actual Cost is less than Planned Value.
Understanding Project Metrics with a Simple Graph
Here are some multiple-choice questions (MCQs) based on the content provided, along with their answers:
1. In the context of the piggy bank analogy, what does Planned Value (PV) represent?
a) The actual money Alex spent on candy.
b) The amount Alex planned to have saved by Day 5.
c) The amount of money Alex actually saved by Day 5.
d) The cost of the toy Alex wanted to buy.
Answer: b) The amount Alex planned to have saved by Day 5.
2. If Earned Value (EV) is less than Planned Value (PV), the project is:
a) Over Budget.
b) Ahead of Schedule.
c) Under Budget.
d) Behind Schedule.
Answer: d) Behind Schedule.
3. In Alex’s story, what was the Actual Cost (AC) by Day 5?
a) $3
b) $2
c) $5
d) $1
Answer: b) $2
4. Which of the following best defines Earned Value (EV)?
a) The value of the actual work done till now.
b) The value of the work you expect to complete by a certain time.
c) The actual money spent on the project until now.
d) The total budget allocated for the project.
Answer: a) The value of the actual work done till now.
5. Alex is Over Budget if:
a) EV < PV
b) EV > PV
c) AC > PV
d) AC < PV
Answer: c) AC > PV
In Conclusion
Navigating project metrics can be as simple as recalling Alex and his piggy bank adventures. This analogy offers a foundational grasp of PV, AC, and EV, equipping you to tackle complex scenarios in the real world of project management.