International Project Management Association (IPMA) Practice Exam

What does the formula ECAC = ACWP + (BCWS - BCWP) signify?

1. Used when variances are expected

2. Preferred when no variances are noted

3. Indicates high risk of project failure

4. Applicable only to final project stages

The correct answer is: Preferred when no variances are noted

The formula ECAC (Estimate at Completion) = ACWP (Actual Cost of Work Performed) + (BCWS (Budgeted Cost of Work Scheduled) - BCWP (Budgeted Cost of Work Performed) is primarily utilized in project management for forecasting the estimated completion cost of a project. This formula is most applicable in scenarios where no significant variances are noted, as it is designed to give a stable and refined estimate of the project's financial status. When variances are minimal or absent, the ECAC formula can provide a reliable projection of future costs based on the current performance metrics captured through ACWP, BCWS, and BCWP. For instance, if the project is running efficiently and aligns with the planned schedule and budget, the formula reflects that continuity and offers a realistic estimate moving forward. In such cases, it serves project managers and stakeholders in making informed decisions about resource allocation and financial planning, maintaining confidence in the project's trajectory. In contrast, other options highlight different project scenarios. The indication of variances or project risks would suggest a need for adjustments or alternative estimations rather than relying solely on the ECAC formula. Therefore, the context of stability and lack of significant variance is essential to the correct understanding of this formula's application