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Guide: Cost Performance Index (CPI)

What It Is:
CPI is a project management metric used in the Cost Management knowledge area. It measures the efficiency of the project's utilization of financial resources. A CPI value of less than 1.0 indicates a cost overrun, while a value greater than 1.0 signifies cost efficiency.

Why it's important:
Understanding CPI is crucial for managing project costs effectively. It provides a clear snapshot of the project's financial health and can be used to forecast total project costs at completion.

How It Works:
CPI is calculated as the ratio of the earned value (EV) to the actual cost (AC). If the EV is greater than the AC, the project is under budget. If the EV is less than the AC, the project is over budget.

Exam Tips:
Remember the formula for CPI: CPI = EV / AC. Be conscious of the CPI value's implications. A question might ask about the project's cost status given a certain CPI value. Knowing how to interpret CPI can lead you to the correct answer. Always remember, CPI less than 1 means the project is over budget, and CPI greater than 1 means the project is under budget. For CPI equal to 1, the project is right on budget.

Answering Questions:
In exam questions regarding CPI, the figures for EV and AC will often be provided. Use these figures to calculate the CPI, and then judge whether the project is under budget, over budget, or right on budget based on the CPI value.

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Cost Performance Index practice test

The Cost Performance Index (CPI) is a key performance indicator in project management that measures cost efficiency by evaluating the value of completed work compared to the actual project expenses. CPI helps to determine how well the project is going in terms of budget efficiency. It is calculated by dividing the Earned Value (EV) by the Actual Cost (AC). A CPI greater than 1 indicates the project is under budget, which means more value is being generated for the invested resources. Conversely, a CPI less than 1 indicates the project is over budget and implies inefficiencies in resource utilization.

Time: 5 minutes   Questions: 5

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Project Management Professional Preparation Package (2024)

  • Earn 35 PDUs needed for your PMP certification
  • 10928 Superior-grade Project Management Professional practice questions.
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  • Unlock Effortless PMP preparation: 5 full exams.
  • 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
  • Bonus: If you upgrade now you get upgraded access to all courses
  • Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!