ITPEC IP April 2019 Question 57
In a project where 60 programs are created with a budget of 18 million yen, when the status of the project was checked 20 days after the start of the project, it was found that 40 out of the 60 programs have been completed at a cost of 15 million yen. If the project continues to proceed at the same pace, what is the excess of cost over budget? Here, the scale of all programs and productivity are the same.
Explanation
4.5 million yen — project the actual cost rate onto all 60 programs, then subtract the budget.
- •Actual cost per program: 15 ÷ 40 = 0.375 million yen
- •Forecast cost of all 60 programs: 0.375 × 60 = 22.5 million yen
- •Excess over budget: 22.5 − 18 = 4.5 million yen
Check: the remaining 20 programs will cost 20 × 0.375 = 7.5 million yen, but only 18 − 15 = 3 million yen of budget is left, again 4.5 million yen over. The 20 days elapsed play no part.
Answer (b)
Why not others:
- •(a) 3 million yen — the overrun so far, not at completion: at the budgeted 18 ÷ 60 = 0.3 million yen per program, 40 programs should have cost 12 million yen, not 15 (it is also the budget left)
- •(c) 6 million yen — the budgeted cost of the remaining 20 programs, 20 × 0.3, not an excess
- •(d) 7.5 million yen — the forecast cost of the remaining 20 programs; the 3 million yen of budget still left must be subtracted from it
Key rule: When all units are equal, forecast cost at completion = cost so far × total units ÷ completed units; the overrun is that forecast minus the budget (in EVM terms, EAC minus BAC).
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