1.
Why Earned Value Reporting
What is Earned Value? , Why Earned Value? , (PMBOK- Fifth Edition) – page 538 says
that earned value is the measurement of work performed expressed in terms of the
budget authorized for the works. To impose improve productivity; you need to know
how you are doing so you can confirm that you are improving.
Most contractor cost reporting systems report the quantity completed and how much
has been spent. These reports are very sufficient for tracking individual cost
accounts.
The only problem with quantity reporting is that it is difficult to summarize the
results from many cost accounts and look at parts of the project or trends over many
accounts.
To be able to summarize, the recommended approach is to convert the quantity to
the "Earned Value" of the quantity completed. Earned Value can be reported in labor
hours, labor cost ($) or total cost ($). The Earned Value of a quantity is the "value"
assigned to it in the cost estimate.

2.
Earned Value = quantity completed x Estimated Unit rate
an alternate calculation of Earned Value is based on the % complete
Earned Value = Total Estimated Cost x % complete
When all quantities are converted to the same "value" then they can easily be
summarized and reported.
On the chart above, there are three values plotted
Planned (PV or BCWS) = the estimated value based on the cost estimate and the
schedule
Earned (EV or BCWP) = the quantity completed to date converted to Earned Value
Actual (AC or ACWP) = the actual cost spent to date.
Comparing Earned and Planned is a measure of schedule progress (ahead/behind
schedule)
Earned < Planned = behind schedule
Comparing Earned and Actual Values is a measure of cost performance (over/under
budget)
Also, the ratio of Actual and Earned Values is a reliable productivity index
Actual/Earned > 1.0 Low productivity (spent more than earned)
Actual/Earned = 1.0 Actual productivity = estimate
Actual/Earned < 1.0 High productivity (earned more than spent)