How is Cost Performance Index (CPI) calculated?

Study for the Landini Certified Associate in Project Management Exam. Prepare with interactive flashcards and in-depth multiple-choice questions. Each question includes hints and answers. Ace your CAPM exam!

Multiple Choice

How is Cost Performance Index (CPI) calculated?

Explanation:
Cost Performance Index measures how efficiently the project is spending money by comparing earned value to actual cost. The correct formula is CPI = EV / AC, where Earned Value is the budgeted cost of the work actually completed and Actual Cost is what has been spent. If CPI is greater than 1, you’re under budget; if it’s less than 1, you’re over budget; if it equals 1, you’re on budget. The other options mix up the ratio, use a different value (planned value), or simply compute a cost variance (EV minus AC) rather than a ratio.

Cost Performance Index measures how efficiently the project is spending money by comparing earned value to actual cost. The correct formula is CPI = EV / AC, where Earned Value is the budgeted cost of the work actually completed and Actual Cost is what has been spent. If CPI is greater than 1, you’re under budget; if it’s less than 1, you’re over budget; if it equals 1, you’re on budget. The other options mix up the ratio, use a different value (planned value), or simply compute a cost variance (EV minus AC) rather than a ratio.

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