3. Earned Value (EV)
Every project manager has to develop the knack on how to calculate earned value with ease. It is simple to understand once the above mentioned terms are familiarized with and calculated.
Earned Value is the percentage of work covered by the PV, or planned value.
For example, if the PV is $1,000 and the project is 20% complete, the EV would be calculated as,
EV = PV x % = 1,000 x 20/100 = $200
When the Earned Value is used in conjunction with Actual Cost Values, it results in a performance ratio of the project.
For example, in addition to the values stated in the previous example, if the Actual Costs on project completion for that phase is 20%, or $800, then the performance ratio would be:
(800 / 1000) x 100 = 80%
If the Performance Ratio is more than 100%, it means the project exceeds the budget (negative expenditure), and if it is equal to 100%, it means that it is alongside the planned budget. In this case, it is well below 100%, at 80% and gives room for positive expenditure.