🎯 Cost Management - EVM Analysis
The Lemonade Stand Adventure
Imagine you’re running a lemonade stand for the summer. You planned to sell 100 cups in 10 days. You saved up $50 to buy lemons, sugar, and cups. Now, how do you know if you’re doing well or not?
That’s exactly what Earned Value Management (EVM) helps you figure out in big projects!
🌟 What is Earned Value Management?
EVM is like a report card for your project.
It answers three simple questions:
- How much work did we PLAN to do? (Planned Value)
- How much work did we ACTUALLY finish? (Earned Value)
- How much money did we SPEND? (Actual Cost)
graph TD A["EVM"] --> B["Planned Value"] A --> C["Earned Value"] A --> D["Actual Cost"] B --> E["Schedule Check"] C --> E C --> F["Cost Check"] D --> F
Think of it this way:
- Your mom asked you to clean your room in 1 hour
- You said it would take 10 toys to put away per 10 minutes
- After 30 minutes, she checks on you
EVM helps answer: Are you on track? Did you spend too much energy?
📅 Planned Value (PV)
What is it?
Planned Value = How much work you PLANNED to finish by now
It’s like your schedule written on a calendar.
Lemonade Stand Example
| Day | Planned Cups | Planned Value ($) |
|---|---|---|
| Day 1 | 10 cups | $5 |
| Day 2 | 20 cups total | $10 |
| Day 5 | 50 cups total | $25 |
If each cup is worth $0.50 and by Day 5 you planned to sell 50 cups:
PV = 50 cups × $0.50 = $25
The Simple Rule
PV = What you SHOULD have done by now (in money)
✅ Earned Value (EV)
What is it?
Earned Value = How much work you ACTUALLY finished (in money terms)
It’s like counting how many homework problems you really solved.
Lemonade Stand Example
By Day 5, you actually sold only 40 cups (not 50).
EV = 40 cups × $0.50 = $20
Why It Matters
Even if you planned to be at $25, you’re only at $20. You’re behind!
EV = What you ACTUALLY did (in money)
💰 Actual Cost (AC)
What is it?
Actual Cost = How much money you REALLY spent
It’s like checking your piggy bank to see what’s left.
Lemonade Stand Example
You planned to spend $25 by Day 5. But lemons were expensive this week!
AC = $30 (You spent $30 instead of $25)
The Problem
- You finished $20 worth of work (EV)
- But you spent $30 to do it (AC)
- That’s not good!
AC = What you ACTUALLY spent
📊 The Big Picture So Far
graph TD A["Day 5 Check"] --> B["PV = $25"] A --> C["EV = $20"] A --> D["AC = $30"] B --> E["Planned: 50 cups"] C --> F["Done: 40 cups"] D --> G["Spent: $30"]
| Measure | Value | Meaning |
|---|---|---|
| PV | $25 | Should have done |
| EV | $20 | Actually did |
| AC | $30 | Actually spent |
Now let’s see what these numbers tell us!
⏰ Schedule Variance (SV)
What is it?
Schedule Variance = Are you ahead or behind schedule?
The Formula
SV = EV - PV
In plain English: What you did MINUS what you planned
Lemonade Stand Example
SV = $20 - $25 = -$5
Negative number = Behind schedule!
Reading the Answer
| SV Value | Meaning |
|---|---|
| Positive (+) | Ahead of schedule! 🎉 |
| Zero (0) | Right on track! ✅ |
| Negative (-) | Behind schedule! 😟 |
You’re $5 worth of work behind. Sell faster!
💸 Cost Variance (CV)
What is it?
Cost Variance = Are you under or over budget?
The Formula
CV = EV - AC
In plain English: What you did MINUS what you spent
Lemonade Stand Example
CV = $20 - $30 = -$10
Negative number = Over budget!
Reading the Answer
| CV Value | Meaning |
|---|---|
| Positive (+) | Under budget! 🎉 |
| Zero (0) | Right on budget! ✅ |
| Negative (-) | Over budget! 😟 |
You spent $10 more than the work is worth. Buy cheaper lemons!
📈 Schedule Performance Index (SPI)
What is it?
SPI tells you how FAST you’re working compared to the plan.
Think of it like a speedometer for your project.
The Formula
SPI = EV ÷ PV
Lemonade Stand Example
SPI = $20 ÷ $25 = 0.80
Reading the Answer
| SPI Value | Meaning |
|---|---|
| Greater than 1 | Working faster than planned! 🚀 |
| Equal to 1 | Right on schedule! ✅ |
| Less than 1 | Working slower than planned! 🐢 |
SPI = 0.80 means you’re only 80% as fast as planned
Real-Life Translation
- SPI of 0.80 = For every 1 hour planned, you only finish 0.8 hours of work
- You need to speed up by 20%!
💵 Cost Performance Index (CPI)
What is it?
CPI tells you how EFFICIENT your spending is.
Think of it like gas mileage for your money.
The Formula
CPI = EV ÷ AC
Lemonade Stand Example
CPI = $20 ÷ $30 = 0.67
Reading the Answer
| CPI Value | Meaning |
|---|---|
| Greater than 1 | Getting more for your money! 💪 |
| Equal to 1 | Spending as planned! ✅ |
| Less than 1 | Wasting money! 💸 |
CPI = 0.67 means for every $1 spent, you only get $0.67 of work done
Real-Life Translation
- CPI of 0.67 = You’re wasting 33 cents of every dollar!
- Find ways to spend less!
🎯 The Complete Picture
graph TD A["EVM Dashboard"] --> B["Schedule Health"] A --> C["Cost Health"] B --> D["SV: EV - PV"] B --> E["SPI: EV / PV"] C --> F["CV: EV - AC"] C --> G["CPI: EV / AC"]
Quick Reference Card
| Metric | Formula | Good Sign | Bad Sign |
|---|---|---|---|
| SV | EV - PV | Positive | Negative |
| CV | EV - AC | Positive | Negative |
| SPI | EV ÷ PV | > 1 | < 1 |
| CPI | EV ÷ AC | > 1 | < 1 |
🧠 Memory Trick
For Variances (SV & CV)
“EV comes first, always!”
- SV = EV - PV (Schedule)
- CV = EV - AC (Cost)
Positive = Good, Negative = Bad
For Indices (SPI & CPI)
“EV on top, divide!”
- SPI = EV ÷ PV
- CPI = EV ÷ AC
Greater than 1 = Good, Less than 1 = Bad
🌈 Final Story: Wrapping It Up
Let’s go back to our lemonade stand:
Day 5 Report Card:
| What | Number | Verdict |
|---|---|---|
| SV | -$5 | Behind schedule by $5 |
| CV | -$10 | Over budget by $10 |
| SPI | 0.80 | Working at 80% speed |
| CPI | 0.67 | Spending efficiency is 67% |
What would you do?
- Speed up sales (fix schedule)
- Find cheaper supplies (fix cost)
- Both! (best answer)
🚀 You’re Ready!
You now understand:
- ✅ PV - What you planned to do
- ✅ EV - What you actually did
- ✅ AC - What you actually spent
- ✅ SV - Schedule ahead or behind?
- ✅ CV - Budget over or under?
- ✅ SPI - How fast are you working?
- ✅ CPI - How efficient is your spending?
EVM is your project’s health checkup. Just like a doctor checks your heart and lungs, EVM checks your schedule and budget!
Now go track some projects! 🎯