Learning pmp formulas the easy way

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::
 TransAct Technologies
 Starwood Hotels
 Affinion Group
 Hewitt Associates
 Wachovia Bank
 Bayer Pharmaceuticals
 Reader’s 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 it’s easy
 With a little practice you should be able
to write them down in 5 minutes!
Let’s 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
F V 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:
O = Optimistic Time
P + (4M) + O
6
Where:
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
(R + 1)
n

2. Activity Standard Deviation
P - O
6
 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

3. Activity Variance
P - O
6
 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
2

4. Three Point Estimate
(PERT)
P + (4M) + O
6
 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

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
project’s communications will be.
N = Number of Stakeholders (People)
N (N – 1)
2

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??

CV SV CPI SPI
Cost Schedule Cost Schedule
Variance Variance Performance Performance
Index Index
EV – AC
Where:
EV = Earned Value
AC = Actual Cost
EV – PV
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

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

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

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

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
Where:
EAC = Estimate at
Completion
AC = Actual Cost
BAC - EV
BAC - AC
Where:
BAC = Budget at Completion
EV = Earned Value
AC = Actual Cost
BAC - EAC
Where:
BAC = Budget at
Completion
EAC = Estimate at
Completion

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
CPI = Cost Performance Index (EV / AC)

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

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
EV = Earned Value
AC = Actual Cost

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

These are final 3 formulas you will need to know:
EMV TOTAL PTA
Expected FLOAT Point of Total
Monetary Value Assumption
P x I
Where:
P = Probability
I = Impact
ES EF
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

15. Total Float = LS - ES
or LF - EF
ES EF
Amount of Float
LS LF
 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

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 let’s 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

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, you’re tired so have a “CC” on the rocks – Communication Channels

Next write in your first 5 formulas under them:
PV SD SDV PERT CC
FV
(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 it’s Rate +1.
Don’t 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 3
wrote all the SD, SDV and PERT formulas the same for now because basically they
are.

Next write in your first 5 formulas under them:
PV SD SDV PERT CC
FV
(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 n
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 “N’s” in it and is the only formula with an N
in it – N standing for number of people always divided by 2.

Above the horizontal line should look like this:
FV SD SDV PERT CC
FV
(R + 1)
n
P - O
6
P - O
6
2 P + (4M) + O
6
N (N – 1)
2

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

Next the inside vertical line write the next 8 formulas:
CV
SV
Notice the first 4 are COST and SCHEDULE alternating starting
CPI
with “C” – COST. Do the “V” Variance before you do the “PI”
Index
SPI
EAC
ETC
TCPI
VAC
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”.

Next to the first 4 formulas, write the following:
CV = EV -
Notice the first 4 formulas all start with EV
SV = EV -
CPI = EV /
Variances “V” are minus
SPI = EV /
Indexes “I” are divides
EAC
ETC
TCPI
VAC

Now complete the next parts of the formulas:
CV = EV - AC
Notice that the Cost formulas are the same the only
SV = EV - PV
difference is the minus or divide signs
CPI = EV / AC
Notice that the Schedule formulas are the same the
SPI = EV / PV
only difference is the minus or divide signs
EAC
For COST, “A” is closer to “C” so put in AC
ETC
TCPI
For SCHEDULE, “P” is closer to “S” so put in SV
VAC

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

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 -
you’re 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 –
you’re 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 – you’re done!
Notice each formula in the chain relies on a
previous formula that you constructed?

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

EMV = P x I
EMV – Probability x Impact is easy to remember
FLOAT = LS - ES or LF - EF
ES EF
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.

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

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 it’s time to test yourself –
don’t get nervous, it’s 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
– don’t worry you’ll never need more paper.
 GOOD LUCK and do not worry – you will pass !!!!!!!!!!!

QUESTIONS
Tell me what you think
mtroncone73@yahoo.com

Learning pmp formulas the easy way

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