Cost Performance Index (CPI)
Cost Performance Index (CPI) is an EVM efficiency metric that measures cost performance as the ratio of earned value to actual cost: CPI = EV / AC.
Explanation
The Cost Performance Index measures how efficiently the project is using its budget. A CPI of 1.0 means the project is exactly on budget. A CPI greater than 1.0 means the project is under budget (getting more value per dollar spent), and a CPI less than 1.0 means the project is over budget (getting less value per dollar spent).
The formula is CPI = EV / AC. For example, if EV = $40,000 and AC = $50,000, then CPI = 0.80, meaning the project is getting only 80 cents of value for every dollar spent.
CPI is considered the most critical EVM metric because research has shown that once a project reaches approximately 20% completion, CPI tends to remain relatively stable for the remainder of the project. This makes CPI a reliable predictor of final cost performance. CPI is also the most commonly used EAC forecasting factor.
Key Points
- •Formula: CPI = EV / AC
- •CPI > 1.0 = under budget; CPI < 1.0 = over budget
- •Most critical EVM metric; tends to stabilize after 20% completion
- •Primary input for EAC forecasting formulas
Exam Tip
CPI = EV / AC. Greater than 1.0 is good. CPI is the most important EVM metric and the most commonly tested. Once established, CPI rarely improves significantly.
Frequently Asked Questions
Related Topics
Earned Value (EV)
Earned Value (EV) is the measure of work performed expressed in terms of the budget authorized for that work.
Actual Cost (AC)
Actual Cost (AC) is the realized cost incurred for the work performed on an activity during a specific time period.
Cost Variance (CV)
Cost Variance (CV) is an EVM metric that measures cost performance as the difference between earned value and actual cost: CV = EV - AC.
Estimate at Completion (EAC)
Estimate at Completion (EAC) is the expected total cost of completing all work, calculated by projecting current performance into the future.
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