--- title: "Cost control; EVA 50 doghouses in 90 days" subject: "Project Engineering" chapter: 4 key: "semester_7/project_engineering:eva-doghouses-50-in-90-days" source: https://www.bctengineer.com/q/semester_7/project_engineering/eva-doghouses-50-in-90-days site: BCT Engineering --- # Cost control; EVA 50 doghouses in 90 days Project Engineering · Chapter 4: Project Implementation and Controlling - Asked in: 2071 Chaitra, 2+4 marks - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/project_engineering/eva-doghouses-50-in-90-days - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-4 ## Question Why is cost control important? A contractor agreed to build 50 doghouses in 90 days at a price of \$1000 per unit. 20 days later, the contractor has finished 10 doghouses with an actual cost of \$8500. What is the status of the project? ## Short answer Cost control prevents overruns, gives early warning, improves profit and forecasts final cost. EVA: PV=11,111.11, EV=10,000, AC=8,500; SV=-1,111.11, CV=1,500, SPI=0.900, CPI=1.176, so behind schedule and under budget; EAC=42,500, forecast 100 days. ## Answer #### Why cost control is important Cost control means monitoring actual expenditure against the budget and taking action on variances. It is important because it: - keeps the project within the approved budget and prevents cost overrun; - gives early warning of problems, so that corrective action is taken in time; - improves profit for the contractor and value for the client; - helps to forecast the final cost and cash flow; - supports good decisions and accountability on resources and prices. #### Status of the project by EVA - BAC = 50 x \$1,000 = \$50,000; time elapsed = 20 of 90 days (planned progress = 22.22 %) - Completed = 10 doghouses (20 %); actual cost AC = \$8,500 $$ \begin{aligned} PV &= \frac{20}{90} \times 50{,}000 = 11{,}111.11\\ EV &= 10 \times 1{,}000 = 10{,}000\\ AC &= 8{,}500 \end{aligned} $$ #### Calculation (in \$) $$ \begin{aligned} SV &= EV - PV = 10{,}000 - 11{,}111.11 = -1{,}111.11\\ CV &= EV - AC = 10{,}000 - 8{,}500 = 1{,}500\\ SPI &= EV/PV = 10{,}000/11{,}111.11 = 0.900\\ CPI &= EV/AC = 10{,}000/8{,}500 = 1.176\\ EAC &= BAC/CPI = 50{,}000/1.176 = 42{,}500\\ ETC &= EAC - AC = 42{,}500 - 8{,}500 = 34{,}000\\ VAC &= BAC - EAC = 50{,}000 - 42{,}500 = 7{,}500\\ \text{Forecast duration} &= 90/SPI = 90/0.900 = 100\ \text{days} \end{aligned} $$ #### Comment - **Schedule:** SV is negative and SPI = 0.900, so the project is **behind schedule**. Only 90 % of the planned work is done. At this rate the work will take about 100 days instead of the planned 90 days (10 days late). - **Cost:** CV is positive and CPI = 1.176, so the project is **under budget**. Each \$1 spent gives \$1.18 of work. - **Forecast:** if the present cost trend continues, the final cost will be \$42,500 against the budget of \$50,000 (variance at completion = \$7,500 saving). **Answer: SV = -\$1,111.11, CV = \$1,500, SPI = 0.900, CPI = 1.176; the project is behind schedule and under budget.** #### Status The contractor is slightly **behind schedule** (SPI = 0.90; about 100 days needed instead of 90) but **under budget** (CPI = 1.18; forecast final cost \$42,500 against \$50,000). The cost saving is good, but the contractor should add resources or work extra shifts to recover the delay, remove bottlenecks (material, equipment, approvals), and keep the present cost discipline. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Which is the main reason cost control is important in a project? A. It removes the need for a schedule B. It gives early warning of variances so corrective action keeps cost within budget C. It guarantees that no design changes occur D. It makes the contract price higher Answer: B. Cost control compares actual expenditure with the budget, so problems are noticed early and corrected to prevent overrun. (Key point: Importance of cost control) 2. BAC = $50,000 and 20 of 90 days have elapsed. What is PV? A. $10,000 B. $8,500 C. $11,111.11 D. $22,222.22 Answer: C. PV = (20/90) x 50,000 = $11,111.11. (Key point: Planned value) 3. 10 of 50 doghouses are complete at $1000 each budgeted. What is EV and how is it found? A. $8,500, the money actually spent B. $11,111, the planned fraction of the budget C. $10,000, the budgeted value of the work done D. $50,000, the total budget Answer: C. EV is the budgeted value of work completed: 10 x 1000 = $10,000, not the actual cost. (Key point: Earned value) 4. SPI = 0.900 and CPI = 1.176. What is the project status? A. Behind schedule and under budget B. Ahead of schedule and over budget C. Behind schedule and over budget D. Ahead of schedule and under budget Answer: A. SPI < 1 means behind schedule; CPI > 1 means under budget (EV 10,000 against AC 8,500). 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