# Introduction of Value Analysis

Value analysis is a technique that is used to improve the value of a product or service. It does this by identifying the needs of the customer and then looking for ways to improve the product or service so that it meets those needs in a better way. Value analysis can be used to improve the quality of a product or service, or to reduce the cost of providing it.

## Terms Used in Earned Value Analysis

• 1
• Planned Value (PV): This is the total budgeted cost for the work that has been scheduled to be completed.

2

• Actual Cost (AC): This is the actual cost incurred for the work that has been completed.

3

• Earned Value (EV): This is the budgeted cost for the work that has been completed
• It is based on the planned value and is a measure of progress.

4

• Schedule Variance (SV): This is the difference between the planned value and the earned value
• A positive variance indicates that the work is ahead of schedule, while a negative variance indicates that the work is behind schedule.

5

• Cost Variance (CV): This is the difference between the earned value and the actual cost
• A positive variance indicates that the work is under budget, while a negative variance indicates that the work is over budget.

6

• Schedule Performance Index (SPI): This is a measure of how well the work is progressing compared to the schedule
• An SPI of 1.0 indicates that the work is on schedule, while an SPI less than 1.0 indicates that the work is behind schedule.

7

• Cost Performance Index (CPI): This is a measure of how well the work is progressing compared to the budget
• A CPI of 1.0 indicates that the work is on budget, while a CPI less than 1.0 indicates that the work is over budget.

## Solved Numerical Example of Earned Value Analysis

• The following is a solved numerical example of earned value analysis.

A project manager is overseeing a project with the following data:

Planned value (PV) = \$100,000

Actual cost (AC) = \$120,000

Earned value (EV) = \$80,000

The project manager wants to calculate the schedule variance (SV) and the cost variance (CV).

To calculate the schedule variance, the project manager first calculates the planned value for the project at the current point in time

• The planned value at the current point in time is \$100,000
• The project manager then subtracts the earned value from the planned value
• This gives a schedule variance of \$20,000.

To calculate the cost variance, the project manager subtracts the actual cost from the earned value

• This gives a cost variance of \$40,000.

## Conclusion

Value analysis is a powerful tool that can be used to improve the performance of organizations. It is a systematic approach to identifying the factors that contribute to the success or failure of an organization and to improving the effectiveness of its operations. When properly used, value analysis can help organizations to achieve their goals and objectives more effectively and efficiently.