EAC — if cost variance continues
EAC stands for "Estimate at Completion." It is your best current guess for how much the entire project will cost by the time it is finished. When you started the project you had a planned budget called BAC, which stands for "Budget at Completion" — the total amount you originally expected to spend. But once work begins, real spending rarely matches the plan exactly, so EAC gives you an updated, realistic total.
This particular version, EAC = BAC / CPI, is used when you believe the spending pattern you have seen so far will keep happening for the rest of the project. CPI stands for "Cost Performance Index," a number that tells you how efficiently you are spending money. A CPI of 1.0 means you are perfectly on budget, a CPI below 1.0 means you are spending more than planned (over budget), and a CPI above 1.0 means you are spending less than planned (under budget).
To calculate it, you simply take your original total budget (BAC) and divide it by your current CPI. Reading the result is easy: if your EAC comes out higher than your BAC, you are heading toward a cost overrun; if it comes out lower, you are on track to finish under budget. A project manager reaches for this formula for a quick, trustworthy forecast when the cost problems (or savings) seen so far are expected to continue steadily.
Think of it like a road trip where your car is burning more fuel than the map predicted. If you notice you're getting only 80% of the mileage you expected, you don't assume it will magically improve — you divide your planned fuel budget by that efficiency to figure out the real total you'll need to reach the destination.
Imagine your project has a total planned budget (BAC) of $100,000. After a few weeks you measure your Cost Performance Index (CPI) and find it is 0.80, meaning for every dollar of value you are earning, you are actually spending $1.25 — you are over budget. You calculate EAC = BAC / CPI = $100,000 / 0.80 = $125,000. This tells you that if you keep spending at this same inefficient rate, the whole project will end up costing about $125,000 — roughly $25,000 more than you originally planned. That early warning gives you time to act.
Every PMP formula explained free — plus worked examples and practice in PMP Math, and full timed mocks in the simulator.