# How To Find The Cost For Weighted Average Cost Method Using Time Sheets to Calculate Project CPI

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## Using Time Sheets to Calculate Project CPI

Performance reporting in the field of Earned Value Management often focuses on software project schedule rather than budget performance. This happens for one of two reasons: the project’s inability to report on budget performance and the lack of interest in budget performance. A lack of interest does not necessarily indicate a lack of financial responsibility or accountability from sponsors; staff accounts for 95% of the cost of most software projects and if the team is on schedule we can expect the project to go on budget. This assumption is valid if the team size is constant, the team members have the same cost (that is, they have the same death rate), and there is no overtime. Once any of these items are added, performance on schedule and performance on budget may vary.

Let me give an example to illustrate my point. Let’s take for example a software project that will introduce a new system in an accounting organization. No equipment required. The software is developed in-house so no new software licenses need to be purchased. The cost of the project is almost entirely due to wages. As long as the project is on schedule and the planned work hours meet the tasks to be performed, both the schedule and budget objectives have been met. Let’s look at the same project when it falls behind schedule and programmers work overtime to make up for lost time. Let’s say it takes 200 hours. The average programmer salary is \$40 per hour with an additional \$20 per hour overtime. The worker’s hourly rate is \$80 per hour, so the overtime rate is \$100 per hour x 200 hours, or \$20 million. The project is back on schedule but the extension has put the cost \$20K over budget. Some of this money is refundable if the programmer doesn’t start charging time on the project until they start work. This means that if the project should be \$20K over budget, it will be \$4K over budget (\$20 per hour x 200 hours).

MS Project will always be your tool of choice to monitor schedule performance. The formula for calculating the Schedule Performance Index (SPI) changes slightly because BCWP (Scheduled Cost of Work Performed, or Value Earned) and BCWS (Scheduled Work Cost, or Value Earned) planned) is no longer measured in dollars. MS Project can measure the cost of work given the rate of loaded work and MS Project will be updated with the actual hours spent on the work. Loaded labor rates may not be readily available from the Finance organization – they may not see the need to calculate this figure or may not have calculated it for the resource. because you follow. It will be difficult to keep MS Project with the actual working hours, which are needed to calculate the cost of work completed (AC or ACWP), and this means that the project manager must be successful in using the MS Project file team. periodical paper.

Let’s take just one example where there is a difference in the rates for different jobs. Let’s say that the top rate for a business analyst is \$100 an hour and the top rate for a programmer is \$80 an hour. The project falls 200 hours behind the schedule due to the delay in the submission of requirements and instead of 1000 hours of effort and patience, the company dedicated 1200 hours to the work. The cost of the business analyst’s work is \$20K over budget (\$120K vs. \$100K). Now check project performance after the scheduler works overtime to get the project back on schedule. The project is on time (planned work = actual work) but over budget because the actual cost exceeds the budgeted amount.

Let’s fast forward to the end of the build and we think that the time the programmers worked overtime was enough to save the project schedule and no more adjustments were needed. Let’s say the total number of program hours planned is 2000. The total budget for the program is \$80 per hour x 2000 hours, or \$160K. Actual cost is \$160K + (\$20 per hour x 200 hours) = \$164K. Total Actual Cost = \$284K (\$120K + \$164K), Total Planned Cost = \$260K (\$100K + \$160K). Although the project is back on schedule, it is over budget and the only way to fix it is to save \$24K elsewhere in the project.

This example illustrates a problem with using the Earned Value method to track schedule progress. Using actual costs or SPI calculations for a project can be misleading. Calculating the SPI using the BCWP/BCWS, or EV/PV formula may tell you that the project is behind schedule when it is actually on time, but over budget. Using MS Project to calculate SPI using the formula Scheduled Work Duration/Actual Work Duration will tell you if your project is on schedule or not. Using the efforts from MS Project will bring the same results, if MS Project is not used as a spreadsheet. Using effort as a substitute for duration allows you to weight the task according to the number of resources allocated to it. The impact of a job that runs 1 week over schedule and requires 10 people to do it will have 10 times the impact of a job that only needs 1 person.

A well-kept time sheet and the capture of the loaded work rate in the MS Project file is the answer to the correct calculation of the CPI (Cost Performance Index) of your project. Taking production rates for each of the project’s resources, or groups of resources, allows you to calculate the budgeted cost of the completed work. The budget is the total hours worked in MS Project, to date, x the staff rate. AC or ACWP is derived from a time control system and is calculated by multiplying the total hours spent on each resource x the work rate for that resource. Total AC is the sum of all costs from all sources. There should be a report available from the time tracking system that will do these calculations for you. This will give you and your backers an accurate picture of the project’s performance on budget.

Projects that involve the purchase of hardware or software can add these costs to the EV/BCWP, or report them separately. In any case, the project manager should agree the procedure with the funding organization and also agree whether to report these costs when they are incurred (i.e. when the hardware and software), or at the time of payment. .

Timesheets have a small advantage: they will show you when your project is running late due to unplanned resources spending time on other projects or activities. Tasks that are late, or completed before the desired time can affect the team members responsible for not spending enough time on the project. Simply compare the time your time tracking system says you spent on your project with the time your MS Project file. Any discrepancy explains why your work is not completed on time.

A good real-time monitoring system should capture the full workload rate for all project resources and support the CPI reporting and analysis purposes you need. You should be able to categorize the resources, activities and steps of the project. The system should also support the project manager assigning resources to the project, closing activities and steps in the project and not assigning resources from the project. You need these safeguards to protect you from people wasting time on your project who have no business doing so. Remember that the project report that the system can produce will be reviewed by external project managers and your project report should be consistent with that report.

Time sheets may not be available for each software organization. Often, the cost of this reporting tool cannot be justified by the benefits it brings to the project. When you’re lucky enough to be part of an organization that implements a time tracking system, support it by ensuring that your project information, including the resources assigned to your project, is documented. well in the system and your project team confidently enters their time on the device. when it should. In return, request the ability to generate the types of reports that your project’s communications plan needs.

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