TL;DR: EVM compares what you planned to spend, what you've actually spent, and what you've actually completed — expressed as three numbers (PV, EV, AC) that drive every other formula. Get those three right and the rest follows.
EVM is built on three measurements at any point in time:
| Value | Full name | Plain meaning |
|---|---|---|
| PV | Planned Value | How much work should be done by now (budgeted cost of scheduled work) |
| EV | Earned Value | How much work is actually done (budgeted cost of work performed) |
| AC | Actual Cost | How much you actually spent on the work done so far |
| BAC | Budget at Completion | Total approved budget for the whole project |
The variances and indexes are all derived from EV, PV, and AC:
| Metric | Formula | Good / Bad signal |
|---|---|---|
| SV (Schedule Variance) | EV − PV | Positive = ahead of schedule; negative = behind |
| CV (Cost Variance) | EV − AC | Positive = under budget; negative = over budget |
| SPI (Schedule Performance Index) | EV / PV | >1 = ahead; <1 = behind; 1.0 = on track |
| CPI (Cost Performance Index) | EV / AC | >1 = under budget; <1 = over budget; 1.0 = on track |
The trap the bank exploits: candidates mix up variance sign convention. A negative CV means you've spent more than the work was worth — that's over budget and bad. The wrong-answer option says "the project is under budget" to catch candidates who misread the minus sign.
EAC (Estimate at Completion) has multiple formulas on the PMP exam. The choice depends on what the scenario tells you about future performance:
| Assumption | Formula |
|---|---|
| Current variance is atypical — future work will be at budget | EAC = AC + (BAC − EV) |
| Current CPI will continue for the rest of the project | EAC = BAC / CPI |
| Both SPI and CPI will continue (weighted forecast) | EAC = AC + [(BAC − EV) / (CPI × SPI)] |
| Re-estimated from scratch (bottom-up) | EAC = AC + ETC (new estimate) |
The bank's Information Gain: the wrong answers use the right formula with the wrong assumption. Read the scenario carefully — if it says "the team expects to perform at the same efficiency going forward," that's the BAC/CPI formula. If it says "the variance was a one-off," that's AC + (BAC − EV).
VAC (Variance at Completion): BAC − EAC. Positive means you expect to finish under budget; negative means over. This is a forecast, not a guarantee.
TCPI (To-Complete Performance Index): the CPI you need on all remaining work to hit your target. Formula: (BAC − EV) / (BAC − AC) to hit original budget, or (BAC − EV) / (EAC − AC) to hit a revised EAC. TCPI > 1.0 means the remaining work must be done more efficiently than anything so far — a useful red flag.