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Earned value: what the numbers tell you
A project has spent $6,000 of a $10,000 budget. Is that good news? You need to know how much work is complete. This CAPM example connects PV, EV, AC, CPI and SPI to that decision.
Money spent is not the same as work completed. Compare the value of the finished work with both the plan and the actual cost.
1. Put three different numbers side by side
A project will prepare ten training stations. Each has an equal budget of $1,000, for a total budget at completion (BAC) of $10,000. At today's checkpoint, five should be finished. Four are complete and accepted. The team has spent $6,000.
In this example, a station earns its full budgeted value when it is accepted, and no value before then. Other projects can use different, agreed measures of progress.
| Measure | Meaning here | Amount |
|---|---|---|
| PV · Planned value | Budget for the five stations planned to be finished | $5,000 |
| EV · Earned value | Budget for the four stations actually finished | $4,000 |
| AC · Actual cost | What the project has actually spent | $6,000 |
2. Ask whether cost and progress match the plan
Cost variance: EV − AC
−$2,000
$4,000 − $6,000 = −$2,000
The completed work cost $2,000 more than its budgeted value. That is unfavorable cost performance.
Schedule variance: EV − PV
−$1,000
$4,000 − $5,000 = −$1,000
The project completed $1,000 less budgeted work than planned by this checkpoint. Progress is behind the plan.
Schedule variance (SV) is expressed in budget units, not days. The −$1,000 does not tell you the finish date. Inspect the remaining work and critical path to understand the schedule impact.
3. Read CPI and SPI as comparisons
Cost performance index
CPI = EV ÷ AC ≈ 0.67
$4,000 ÷ $6,000 ≈ 0.67
For each $1 spent, the project has completed about $0.67 of budgeted work.
Schedule performance index
SPI = EV ÷ PV = 0.80
$4,000 ÷ $5,000 = 0.80
The project has completed 80% of the budgeted work planned for this checkpoint.
For these indices, 1 means performance matches the plan, below 1 is unfavorable, and above 1 is favorable. SPI of 0.80 does not mean the whole project is 80% complete. It compares progress with the plan for this date.
Before suggesting a recovery action, confirm that completed work, cost records and the planned value all refer to the same checkpoint and agreed scope.
4. Change one fact and check what it means
Suppose the same four stations are accepted, but actual cost is $3,500 instead of $6,000. Planned value is still $5,000. Is the project now both under budget for its completed work and ahead of plan?
Check the answer and reasoning
Cost performance is favorable, but progress is still behind the plan. CV = $4,000 − $3,500 = +$500 and CPI = $4,000 ÷ $3,500 ≈ 1.14.
EV and PV did not change, so SV stays −$1,000 and SPI stays 0.80. Lower spending did not finish the fifth station. Read the cost and progress measures separately before describing overall project health.
Sources and scope
The training-station example and practice change were created by LevelUP. These PMI references explain the formulas and how to interpret them.
This guide focuses on reading performance at a checkpoint. It does not forecast the final cost or cover every earned-value formula.
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