Learning PMP Formulas

the Easy Way

A step by step process to learn the formulas
needed to pass the PMP examination


Presented by Mark Troncone, MBA, PMP , CSM
About Me Mark Troncone
PMP Certified Project Management Institute
CRM Certified SCRUM Master SCRUM Alliance
Certified IT Business Analyst State of Connecticut
Active career transition mentor
MBA, Management
BS, Marketing
AS, Accounting
Work experience::
Starwood Hotels
Affinion Group
Hewitt Associates
Wachovia Bank
Bayer Pharmaceuticals
Readers Digest
James River Corporation
Agenda
The purpose of this presentation
The PMP examination and formulas
The formulas you need to know for the test
The formulas explained
How to learn the formulas the easy way
Test yourself time to prepare
What to do - pre-exam
Your ready!
The Purpose of this Presentation
This presentation has 3 goals:

1. To explain the formulas that you
will need to know for the PMP
examination
2. To give you an easy-to-learn method
to remember these formulas
3. To ensure that you can quickly
reproduce these formulas on paper
before you start the PMP exam
The PMP examination and formulas
Some things to know before the test:

Do not get intimidated by the formulas
The formulas are not hard to learn
If you follow my step by step plan its easy
With a little practice you should be able
to write them down in 5 minutes!

Lets get started!!!!!!!!!!!!
The Formulas You Need to Know for the Test
These are the first 5 formulas you will need to know:

Present Standard Activity PERT Communication
Value Deviation Variance (3 Point Est.) Channels

FV C
(R + 1)

Where:

FV = Future Value

R = Interest Rate

n = # of time periods
P - O
6

Where:

P = Pessimistic Time

O = Optimistic Time






Where:

P = Pessimistic Time

O = Optimistic Time


P + (4M) + O
6

Where:

P = Pessimistic Time

M = Most Likely Time

O = Optimistic Time
N (N 1)
2

Where:

N = Number of People

P - O
6
2
n
The Formulas Explained - First 5
1. Present Value


Present value means - the value today of future cash flows

FV = Future Value
R = Interest Rate
n = Number of periods
FV C
(R + 1)

n
The Formulas Explained - First 5
2. Activity Standard Deviation


This can be used for both Time and Cost estimates
The + or an activities/cost range

P = Most Pessimistic Time or Cost estimate for an activity
O = Most Optimistic Time or Cost estimate for an activity
P - O
6
The Formulas Explained - First 5

3. Activity Variance


This can be used for both Time and Cost estimates
Represents variances of critical path activities

P = most Pessimistic Time or Cost estimate for an activity
O = most Optimistic Time or Cost estimate for an activity

Note: Remember to Square the result which is a fancy way of
multiplying the result times itself

P - O
6
2
The Formulas Explained - First 5

4. Three Point Estimate
(PERT)

This can be used for both Time and Cost estimates
Also Known as Expected Activity Duration
EAD + or SD gives you a range for an individual activity
estimate ex) an activity can take 25 days + or 3 days

P = Most Pessimistic Time or Cost estimate for an activity
M = Most Likely Time or Cost estimate for an activity
O = Most Optimistic Time or Cost estimate for an activity
P + (4M) + O
6
The Formulas Explained - First 5

5. Communication Channels


This formula is used to calculate the number of
communication channels required for the number of
stakeholders. It will give an indication of how complex a
projects communications will be.

N = Number of Stakeholders (People)

N (N 1)
2

The Formulas You Need to Know for the Test
These are the next 4 formulas you will need to know:

4 key terms you need to know before we start:

PV = Planned Value As of today what is the amount of work that
should be completed?
EV = Earned Value As of today what is the amount of work that is
actually accomplished?
AC = Actual Cost As of today what is the actual cost incurred for the
work accomplished
BAC = Budget at Completion How much did we budget for the total
project??
The Formulas You Need to Know for the Test
These are the next 4 formulas you will need to know:

CV SV CPI SPI
Cost Schedule Cost Schedule
Variance Variance Performance Performance
Index Index


EV - AC C


Where:

EV = Earned Value

AC = Actual Cost



EV - PV C


Where:

EV = Earned Value

PV = Planned Value

EV / AC


Where:

EV = Earned Value

AC = Actual Cost

EV / PV


Where:

EV = Earned Value

PV = Planned Value
The Formulas Explained - Next 4

6. CV - Cost Variance EV AC

The difference between Earned Value and Actual Cost
Negative value = Cost Overrun or over budget
Positive value = on or under cost or under budget
Are we under or over budget 1.0 or greater is good

EV = Earned Value
AC = Actual Costs

The Formulas Explained - Next 4

7. SV - Schedule Variance EV PV

The difference between Earned Value and Planned Value
Negative value = behind schedule
Positive value = on or ahead of schedule
Are we ahead or behind schedule 1.0 or greater is good

EV = Earned Value
PV = Planned Value

The Formulas Explained - Next 4

8. CPI - Cost Performance Index EV / AC

The ratio of Earned Value to Actual Cost
Value < 1 = Cost over budget
Value > 1 = Cost below budget
How efficiently are we using our resources
Ex) We are only getting about 89 cents out of every dollar we
put into the project THIS IS BAD

EV = Earned Value
AC = Actual Costs
The Formulas Explained - Next 4

9. SPI - Schedule Variance EV / PV

The ratio of Earned Value to Planned Value
Value < 1 = behind schedule
Value > 1 = on or ahead of schedule
How efficiently are we using time
Ex) We are only progressing at about 83 percent of the rate
planned THIS IS BAD

EV = Earned Value
PV = Planned Value
The Formulas You Need to Know for the Test
These are the next 4 formulas you will need to know:

EAC ETC TCPI VAC
Estimate at Estimate to To Complete Variance at
Completion Complete Performance Completion
Index

BAC / CPI

Where:

BAC = Budget at
Completion

CPI = Cost Performance
Index



EAC - AC C

Where:

EAC = Estimate at
Completion

AC = Actual Cost



BAC - EV
BAC - AC C

Where:

BAC = Budget at
Completion
EV = Earned Value
AC = Actual Cost



BAC - EAC
C
Where:

BAC = Budget at
Completion

EAC = Estimate at
Completion


The Formulas Explained - Next 4

10. EAC - Estimate at Completion BAC / CPI

The ratio of Budget at Completion to Cost Performance Index
This formula is used if no variances from the BAC have occurred
A forecasting formula
or AC + (BAC EV) calculates the actual to date plus remaining
budget Ac plus the remaining work to perform
As of now, how much do we expect the total project to cost

BAC = Budget at Completion
CPI = Cost Performance Index (EV / AC)
The Formulas Explained - Next 4

11. ETC - Estimate to Complete EAC - AC

The difference between the Estimate at Completion ratio and the
Actual Costs to date
This is a forecasting formula
From this point on, how much more do we expect it to cost to
finish the project cost or what will the remaining work cost

EAC = Estimate at Completion
AC = Actual Cost
The Formulas Explained - Next 4

12. TCPI - To Complete BAC / EV
Performance Index BAC / AC

The ratio of Budget at Completion to Earned Value divided by the
ratio of Budget at Completion to Actual Cost
This formula divides the work remaining to be done by the money
remaining to do it
Ex) By how much does our performance need to improve, in order
come on in time and on budget

BAC = Budget at Completion
EV = Earned Value
AC = Actual Cost
The Formulas Explained - Next 4

13. VAC -Variance at Completion BAC EAC

The difference between the Budget at Completion and
the Estimate at Completion ratio
This is a variance formula
Ex) As of today will we be under or over budget at the
end of the project

EAC = Estimate at Completion
BAC = Budget at Completion
The Formulas You Need to Know for the Test
These are final 3 formulas you will need to know:

EMV TOTAL PTA
Expected FLOAT Point of Total
Monetary Value Assumption

P x I C

Where:

P = Probability

I = Impact


ES EF
C


LS LF

[(CP TP) / BSR] + TC

Where:

CP = Ceiling Price

TP = Target Price

BSR = Buyers Share Ratio

TC = Target Cost


LS - ES
or
LF - EF
The Formulas Explained - Final 3

14. EMV - Expected Monetary Value P x I

Used to determine the overall ranking of risks.
A better way than evaluating just the probability or impact.

P = Probability
I = Impact
The Formulas Explained - Final 3
15. Total Float = LS - ES
or LF - EF
Use this formula to compute float of activities
We always begin Late so start each formula as LS or LF
Used to evaluate delay or slack on activities thus determining
resource allocation
Remember activities on the Critical Path almost always have zero
float

LS = Late Start ES = Early Start Note: Either formula
LF = Late Finish EF = Early Finish will get the same answer
ES EF
C
Amount of Float

LS LF

The Formulas Explained - Final 3
16. PTA - Point of Total Assumption
[(CP TP) / BSR] + TC

Only applies to Fixed Price incentive fee contracts
Refers to the amount above which the seller bears all the loss
of a cost overrun
Costs that go above the PTA are assumed to be due to
management

CP = Ceiling Price TP = Target Price
BSR = Buys Share Ratio TC = Target Cost
How to Learn the Formulas the Easy Way
OK lets put it all together.

Get a regular piece of 8 x 11 paper
Draw a vertical line 2 across from the left side of the paper
Draw a horizontal line 3 down from the top of the paper


How to Learn the Formulas the Easy Way
Above the horizontal line put your first 5 formula names:
PV SD SDV PERT CC
Future Standard Standard Expected Communication
Value Deviation Deviation Activity Channels
Duration
Notice we start with the present - PV.
But these are standard formulas, so write SD twice and take the V from
the first formula PV and put it at the end of your second SD to make SDV.
Next remember to wash your hair with PERT
Last, youre tired so have a CC on the rocks Communication Channels
How to Learn the Formulas the Easy Way
Next write in your first 5 formulas under them:

PV SD SDV PERT CC

FV C
(R + 1)

n
P - O
6
P - O
6
P - O
6
N (N 1)
2

For the first formula just know that for the Present we must know the Future divided by its Rate +1.
Dont forget that the Rate + 1 result must always be taken to the n power where n = number of time
periods. Ex) if the rate was 0.1 and the number of time periods were 3 years then the result would be:
(1 + 0.1) = 1.331
Notice I wrote all the SD, SDV and PERT formulas the same for now because basically they
are.

3
How to Learn the Formulas the Easy Way
Next write in your first 5 formulas under them:

PV SD SDV PERT CC


FV C
(R + 1)
P - O
6
P - O
6
2
P + (4M) + O
6
N (N 1)
2

For the next three formulas just know that always start out the same P O / 6.
For SDV just square it.
For PERT remember that P-E-R-T is 4 letters, so you must have 4 pieces to the formula the P
(Pessimistic) and O (Optimistic), but have to drop the M (Most Likely) x 4 in the middle.
The name Communication Channels has 4 Ns in it and is the only formula with an N in
it N standing for number of people always divided by 2.

n
How to Learn the Formulas the Easy Way
Above the horizontal line should look like this:



FV SD SDV PERT CC


FV C
(R + 1)

n
P - O
6
P - O
6
2
P + (4M) + O
6
N (N 1)
2

How to Learn the Formulas the Easy Way
Now below the horizontal line write the 4 key terms:

EV AC PV BAC

Remember:
EV = Earned Value
AC = Actual Cost
PV = Planned Value
BAC = Budget at Completion
How to Learn the Formulas the Easy Way
Next the inside vertical line write the next 8 formulas:
CV
SV
CPI
SPI
EAC
ETC
TCPI

VAC
Notice the first 4 are COST and SCHEDULE alternating starting
with C COST. Do the V Variance before you do the PI
Index
After you know your COST and SCHEDULES you can then E
Estimate. Just remember A in EAC comes before T in ETC
After you Estimate you can Complete Performance. Just remember
T comes after E.
After Completing Performance, how much you will be over or under
budget at the end of the project. Just remember V comes after T.
How to Learn the Formulas the Easy Way
Next to the first 4 formulas, write the following:
CV = EV -
SV = EV -
CPI = EV /
SPI = EV /
EAC
ETC
TCPI

VAC
Notice the first 4 formulas all start with EV
Variances V are minus
Indexes I are divides
How to Learn the Formulas the Easy Way
Now complete the next parts of the formulas:

CV = EV - AC
SV = EV - PV
CPI = EV / AC
SPI = EV / PV
EAC
ETC
TCPI

VAC
Notice that the Cost formulas are the same the only
difference is the minus or divide signs
Notice that the Schedule formulas are the same the
only difference is the minus or divide signs
For COST, A is closer to C so put in AC
For SCHEDULE, P is closer to S so put in SV
How to Learn the Formulas the Easy Way
Now complete the next 2 formulas:

CV = EV - AC
SV = EV - PV
CPI = EV / AC
SPI = EV / PV
EAC = BAC / CPI
ETC = EAC - AC

TCPI

VAC
Notice that the first part of the EAC formula
contains BAC both have AC in it. EAC has
a C in it the closest formula up the chain
with a C in it is CPI so put it in your done.
Remember to divide in this formula! It is the
only one left where you have to divide.
For ETC, notice you must have completed EAC
before it, which becomes the first part of this
formula. The next part AC is contained in the
first part of the formula.
Note: EAC can also be written as AC + (BAC
EV) just a little twist but contained in CPI
How to Learn the Formulas the Easy Way
Now complete the last 2 formulas:

CV = EV - AC
SV = EV - PV
CPI = EV / AC
SPI = EV / PV
EAC = BAC / CPI
ETC = EAC - AC
TCPI = BAC - EV
BAC - AC
VAC = BAC - EAC
TCPI is the easiest formula of them all. Start off
by drawing a divide line and write BAC above
and below it and write 2 minus signs - youre
50% done already! TCPI has CPI in it. Now
look at the formula for CPI it contains EV/AC.
Just use that to complete the formula youre
done!
For VAC use the BAC in the previous formula.
Notice VAC has AC in it. The closest formula
up the chain that has AC in it is EAC. Put it
in the formula youre done!
Notice each formula in the chain relies on a
previous formula that you constructed?
How to Learn the Formulas the Easy Way
In the middle of your page add the last 3 formulas:

EMV = P x I

FLOAT = LS - ES or LF - EF

POTA = [(CP - TP) / BSR] + TC

Note: These you will just have to know
How to Learn the Formulas the Easy Way

EMV = P x I


FLOAT = LS - ES or LF - EF
EMV Probability x Impact is easy to remember
ES EF
C
FLOAT

LS LF

FLOAT We always start late and subtract the value
above it in the box. Write this box down, it may become
useful if questions are asked about coming up with a
critical path or forward or backwards path of an
activity.
How to Learn the Formulas the Easy Way
POTA = Point of Total Assumption

POTA = [(CP - TP) / BSR] + TC

POTA - the first half of the formula both contain P = PRICE.
Remember you have to jump to the C ceiling to hit (minus) a T
target. Never forget any buyer always gets his share so you have to divide
out his BSR Buyers Share Ratio. But costs are always around so and
you always have to add back his TC Target Cost
How to Learn the Formulas the Easy Way
Those are the formulas to know for the exam

Just remember to set up the sheet
the way I laid it out for you and
you will do fine.


Now its time to test yourself
dont get nervous, its easy!
Test Yourself Time to Prepare
Study the formulas until you feel confident
in being able to recite them.
Practice writing them down using my T
bar on a sheet of paper.
Everyday practice writing them down 5 times.
If you make mistakes, understand why and
correct it.
Talk yourself through writing them down using
my formula memory method.
Do this for two weeks at different times of the day.
What to do - Pre-Exam
When you feel confident with knowing the formulas:

Get an egg timer or have someone time you.
Write down the formulas as fast as you can start
off with 15 minutes maximum.
Initially, see how long it took you for this first attempt.
Use this initial time as your starting point.
Do this 5 times a day, if you make any mistakes,
review the reason(s) why.
Every few days try to take off 1 to 2 minutes your time
A week before the exam you should be able to write
them down in 5 minutes
Your ready!
On the day of the exam you will be given 3 sheets of blank paper to use
for math problems.
Before the actual exam starts on the computer you will have 15 minutes to
view a computer tutorial to become familiar with the computer commands
for the test.
Use part of this this time to write down the formulas on one side of a
blank piece of paper
Use this paper as your guide throughout the exam for questions
concerning formulas it is perfectly OK to do this!!!!!
Remember: if you need more paper you will have to turn in used sheets
dont worry youll never need more paper.
GOOD LUCK and do not worry you will pass !!!!!!!!!!!

QUESTIONS

Tell me what you think

mtroncone73@yahoo.com