ITPEC IP April 2023 Question 57
There is a project with a development period of 10 months and a labor cost budget for development of 10 million yen. After the elapse of five (5) months, the actual labor cost is recorded as 6 million yen, and 40% of the deliverables is complete. If the development is continued till completion with the same productivity, how much will the excess of the budget for labor cost be?
Explanation
5 million yen — at the same productivity the whole project will cost 15 million yen against a budget of 10 million yen.
Productivity here is how much deliverable each yen produces: 6 million yen of labour produced 40% of the deliverables.
- •Cost at completion: 6 ÷ 0.4 = 15 million yen
- •Excess over the budget: 15 − 10 = 5 million yen
The same in earned value terms: the work done is worth 10 × 0.4 = 4 million yen of budget but cost 6 million yen, so every yen of budgeted work costs 6 ÷ 4 = 1.5 yen, and 10 × 1.5 = 15 million yen. The elapsed 5 months do not enter the forecast.
Answer (d)
Why not others:
- •(a) 1 million yen — compares the 6 million yen spent with the 5 million yen planned for 5 months: an overrun so far, measured against time rather than work done, and not projected to completion
- •(b) 2 million yen — the overrun so far (6 million yen spent on work worth 4 million yen); the remaining 60% overruns at the same rate, adding another 3 million yen
- •(c) 2.5 million yen — would mean a total of 12.5 million yen, so the remaining 60% would cost 6.5 million yen, less than the 9 million yen that the observed rate gives
Key rule: Forecast the cost at completion as actual cost ÷ fraction complete (in EVM, budget ÷ CPI); the overrun so far understates the final overrun, which keeps growing with the remaining work.
Project Management · AI-written, may contain errors
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