PMP Math

PMP Math Formulas 

All What you need to know to guarantee all math questions in the PMP exam , Written based on my personal experience .

By Shadi Al-Sha’er , PMP® , RMP® , PRINCE2 Practitioner ®, September,12,2018


 

For the PMP exam, you must know how to correctly answer questions with formulas about earned value management , communication Channels, procurement Contracts , Expected monetary value , Network diagrams and critical path , project selection methods ,  and some mathematical basics in regards of project management , now it’s the time to revisit the following topics, memorize their formulas for the exam and practice some tough questions:

  1. Project Selection Methods : Present Value , Net Present Value , Cost Benefit Analysis & Payback Period
  2. Activity Cost & Duration Estimates: Simple Average, Weighted Average, Standard Deviation and activity range of estimate .
  3. Critical Path Method: Early Start, Early Finish, Late Start and Late finish , Float calculations , Critical path determination .
  4. Earned Value Management: Cost and Schedule Variances , Cost and Schedule Performance Indexes , the 4 formulas of Estimate at Completion , Estimate to Complete , To Complete performance Index and Variance at completion .
  5. Numerical Risk Analysis: Expected Monetary Value , Decision Tree analysis , Contingency Reserve Calculations .
  6. Communication Channels : Communication Channels Formula
  7. Contracts Management: Make/Buy Analysis ,Contract fees and Profit , point of total assumption .

You will see different question models testing your knowledge in the PMP Math Formulas , questions that are straightforward where you are given values and you are expected to apply the correct formula , in such type you will get a set of values and asked to calculate a result. another type of math questions where it  looks as if you can simply apply one formula. But as you are applying this first formula you suddenly realize that one value is missing. This missing value must then first be calculated via a second formula , so in such type of questions you need to apply two formulas , In some type of questions you need to invert the formulas , For instance instead of asking “2+8=?” the question would be “2+?=10” and it is your job to invert the formula and calculate “10-2=8 . Specially for the earned value management questions you will be given the result of the formula ( Eg : Cost & Schedule Variance ) and you will be asked “ What does this result mean for the project?” , one of the complex questions you will see for the Estimate at Completion is to select the right formula you need to use in the scenario described in the question , also you will see questions testing your knowledge in the definition of each formula , it’s not only about memorizing the formula were numbers need to be inserted , you need to understand the definition of each formula !

What’s my advise ? Practice , Practice , Practice !

Below am listing the important 22 formulas you need to MEMORIZE for the exam !

Practice Math Questions as much as possible , you can guarantee 15 % or more of the exam questions , expect to see around 12-15 questions only on the Earned Value management Calculations ,

I have prepared a course on Udemy platform which was above the students expectations with more than 250 students enrolled and a rating of 4.7 , it contains 4.5 hours of recorded videos , going through each of the 7 topics i mentioned above and all math formulas included , In this course I will be solving with you 50+ tough math exam questions , I highly recommend this course to master the PMP math topics and formulas , you can enroll through the link here for a price of 19.99$ only ,

 

Topic Term Definition Formulas
Project Selection Methods – Economic Models Present Value (PV) It’s the Value today of a future cash flow , project with higher PV should be selected . PV = FV / ( 1+r)ª

FV , Future Value is the value of an asset on a specific date.

r , Interest Rate

a, Number of years

 

Net Present Value (NPV) The Present value of total benefits minus the costs over                          time periods , Project with higher NPV should be selected . NPV =Σ present Value of Income – Σ Present value of cost

 

NPV , Net Present Value

Σ     , Sum

 

Payback Period Length of time it takes for an organization to recover its investment in the project before it starts making profits , Project with shorter Payback period should be selected . Payback period = Total Investment / expected revenue

Note : If the expected revenue per month the result of the formula will be months .

Cost Benefit Analysis Analysis of the expected revenue of the project compared   to the expected cost , Project with higher benefit cost ratio shall be selected . Ratio = Benefit / Cost
Activity cost/duration estimates Simple Average / Triangle Distribution Gives same weight for each of the three points estimates

 

=(P+M+O ) / 3

P = Pessimistic

O = Optimistic

M= Most Likely

Weighted / Beta Average Gives stronger consideration to the most likely estimate =(P+4M+O) /6

P = Pessimistic

O = Optimistic

M= Most Likely

Standard Deviation (SD) The possible range of the estimate, the greater the range created by the standard deviation calculation , the greater the risk . SD=(P-O)/6

P = Pessimistic

O = Optimistic

Range of Estimate A range of the estimate starts with EAD-SD and ends with EAD+SD

 

Range of estimate EAD ± SD

EAD : Expected Activity Duration

Critical Path Method Float The amount of time an activity can be delayed without delaying the project end date or project milestone. Float = LS – ES

= LF – EF

ES : Early Start

EF : Early Finish

LS : Late Start

LF : Late Finish

 

Earned Value Management Cost Variance (CV) Cost difference between planned and actual , target value is 0 , positive is good , Negative is bad CV= EV – AC

EV : Earned Value

AC : Actual Cost

Schedule Variance (SV) Schedule difference between planned and actual , target value is 0 , positive is good , Negative is bad

 

SV= EV – PV

EV : Earned Value

PV : Planned Value

Cost Performance Index (CPI) Ratio of planned to actual costs , target value is 1 , greater than one is good , less than 1 is bad

 

CPI= EV/AC

EV : Earned Value

AC : Actual Cost

Schedule Performance Index ( SPI ) Ratio of planned to actual schedule, target value is 1 , greater than one is good , less than 1 is bad

 

SPI= EV/PV

EV : Earned Value

PV : Planned Value

Estimate At Completion (EAC)

 

As of today, How much we expect the total project to cost?

 

 
EAC , Formula 1 This formula calculate the actual costs to date plus a new estimate for the remaining work . It is used when the original estimates assumptions are no longer valid EAC= AC + ETC

AC : Actual Cost

ETC : Estimate To Complete

EAC , Formula 2 This formula is used if there is no variances from BAC .have occurred or you will continue in the same rate of spending. EAC= BAC / CPI

BAC : Budget At Completion

CPI : Cost Performance Index

EAC , Formula 3 This formula calculate the actual costs to date plus remaining budget , it is used when current variances are through to be atypical of the future , It is the actual cost plus the remaining value of work to perform EAC= AC + ( BAC-EV)

AC : Actual Cost

BAC : Budget At Completion

EV : Earned Value

EAC , Formula 4 This formula calculates actual to date plus the remaining budget modified by performance , It’s used when current variances are though to be typical of the future and when the project schedule constraints will influence the completion of the remaining efforts

 

EAC= AC + ( BAC-EV)/(CPI*SPI)

AC : Actual Cost

BAC : Budget At Completion

EV : Earned Value

CPI : Cost Performance Index

SPI : Schedule Performance Index

Estimate To Complete ( ETC) How much more will the project cost?

 

ETC=EAC – AC

EAC : Estimate At Completion

AC : Actual Cost

Variance At Completion (VAC) As of today , how much over or under budget do we expect to be at the end of the project

 

VAC= BAC-EAC

BAC : Budget At Completion

EAC : Estimate At Completion

To Complete Performance Index (TCPI) The Formula divides the work remaining to be done by the money remaining to do it .The only index with below 1 is good , above 1 is bad !! TCPI= ( BAC-EV)/(BAC-AC)

BAC : Budget At Completion

AC : Actual Cost

EV : Earned Value

 

Numerical Risk Analysis Expected Monetary Value (EMV) While you are evaluation a risk you will look at the probability or impact, but calculating the expected monetary value is a better measure to determine an overall ranking of risk .

 

EMV= P * I

P:  Probability

I: Impact

 

Communication Communication Channels Simple Concept , For each added stakeholder there should be increase in the number of communication channels Number of Channels = N(N-1) / 2

N : Number of Stakeholders

Contracts Management Point of Total Assumption (PTA) The amount above which the seller bears all the loss of a cost overrun , Buyers assume that costs go above the PTA due to seller mismanagement . It only relates to Fixed price incentive fee contract type PTA= ( Ceiling Price-Target Price)/Buyer’s sharing ration  + Target Cost

 

 

If you are welling to pass the PMP exam from your first attempt , this is a topic you cannot ignore ! as i mentioned earlier , the PMP math questions will have a share of around 30 questions , you need to memorize and understand all math formulas required , for a comprehensive explanation of the PMP math concepts and questions , you can enroll for my PMP detailed math concepts here .

Once you feel you are ready and mastered the PMP math concepts , you can test your self through the 150 tough math questions here .

Do not hesitate to contact me for guidance and help preparing for the PMP exam on info@eliteminds.co

 

 

 



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