Billy is the project manager of the PQW Project and she has an assigned project budget of
$655,000. Currently she is 80 percent complete with the project though she was scheduled to be
90 percent done by this date. She has spent $490,000 to date. What should Billy report as her
cost performance index (CPI)for this project?
A.
.07
B.
1.07
C.
$34,000
D.
.89
Explanation:
Cost performance index (CPI) is used to calculate performance efficiencies. It is used in trend
analysis to predict future performance. CPI is the ratio of earned value to actual cost. The CPI is
calculated based on the following formula: CPI = Earned Value (EV) / Actual Cost (AC) If the CPI
value is greater than 1, it indicates better than expected performance, whereas if the value is less
than 1, it shows poor performance. The CPI value of 1 indicates that the project is right on target.
In this instance the earned value is $524,000 and the actual costs are $490,000. In this project
Billy has spent less than what the work is worth – a good thing. This could be because of a cost
savings, such as travel or shipping, or because a risk event didn’t come into play. This causes the
positive CPI – something which does not happen very often.
Answer option A is incorrect. .07 is an incorrect calculation for the cost performance index for the
project.
Answer option D is incorrect. .89 represents the schedule performance index.
Answer option C is incorrect. $34,000 is the cost variance of the project.