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# PMP Important Formulas If you are preparing for PMP examination, you would need to remember formulas, some values and rules that are covered under 10 knowledge areas.  It is preferable to glance through it just before you take your exam.  Needless to say that these rules, values and formulas are not just for your exam but are effective tool for project managers.

Project Selection

• PV = FV/ [(1+r)]^n
• FV = PV * [(1+r)]^n
• Highest NPV number wins.
• Highest IRR number wins.
• Highest ROI number wins.
• Lowest Payback Period number wins.
• BCR= Benefit/Cost, BCR >1 Means Better Benefit
• CBR= Cost/Benefit, CBR <1 Means Better Benefit
• Opportunity Cost = Value of project not being chosen

Six Sigma

Population Covered Under

• -1 sigma and +1 Sigma: 68.26%
• -2 sigma and +2 Sigma: 95.46%
• -3 sigma and +3 Sigma: 99.73%
• -6 sigma and +6 Sigma: 99.99%

*Note: Above is true for Project data which is continuous and has normal distribution. Also, the opportunity of Defect in 6 Sigma Project/ process is 3.4 per million.

Control Limits: Process Control Limits are derived statistically using 3standard deviation/ sigma from mean (-3 standard deviation for LCL and +3 standard deviation for UCL).

Specification Limits: Specification Limits and target value details for project/ process is given by the customer.

Mean Vs Median Vs Mode:

• Average or Mean = (Sum of the Numbers)/(Number of Items)
• Median = Arrange all the values in order and pick the middle number. In case of two middle number, take mean of two numbers.
• Mode = Most occurring number in dataset

Budget:

• Project Budget = Approved Money for Work + Contingency Reserve + Management Reserve

Cost Estimation

A Guide to the Project Management Body of Knowledge (PMBOK® Guide) provides the following guidelines for accuracy of estimation:

• Rough Order of Magnitude Estimate: -25 percent to +75 percent (prepared during project project initiation).
• Budget Estimate: -10 percent to +25 percent (prepared during project planning stage)
• Definitive Estimate: -5 percent to +10 percent (Later during the project, the estimate will become more refined)
• Final estimate: 0%

Schedule:

• Float on the critical path = 0 days
• Total Float = LS – ES OR Total Float = LF – EF
• While Crashing, Crash least expensive tasks on critical path
• Activity Duration = EF – ES  OR Activity Duration = LF – LS (EF is Early Finish, ES is Early Start, LS is Late Start and LF is Late Finish).
• Free Float(FF) = ES of following – ES of Present – DUR of Present.
• Total Float (TF) = ES of Minimum Early start of successor activities- ES of the given activity- Given activities duration.
• Free Float is always less than or equal to total float.
• Total float is the float on project without delaying project.
• Free float is the float on activity where any of the successor activities is not delayed.
• Standard Deviation = (P -O)/6
• Variance of an activity = [( P -O)/6] ^( 2)
• Triangular Distribution (simple average). Estimate =(O+M+P) / 3 (O is optimistic, M is Most Likely and P is Pessimistic)
• Beta Distribution (weighted average). Estimate = (O+4M+P) / 6

Quality:

• Pareto Diagram = 80/20

Communications:

• Time Project Manager Communicates >= 90%
• Number of Communication Channels = (n ∗ (n-1))/2

Procurement:

• Point of Total Assumption(PTA) = (Ceiling Price -Target Price )/(Buyers Share Ratio)+Target Cost

Risk:

• Expected Monetary Value(EMV) = P ∗ I where P is Probability and I is impact

Earned Value Management (EVM)

• EV = PV/AC
• CV = EV – AC
• SV = EV – PV
• CPI = EV/AC
• SPI = EV/PV
• TCPI = (BAC⁄EV)/(BAC⁄AC)
• EAC (no variances) = BAC/CPI
• EAC (with variances) = AC + ETC
• EAC (typical) = AC + ( BAC – EV )
• EAC (atypical) = AC + (BAC -EV)/CPI
• ETC = EAC – AC
• VAC = BAC – EAC

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