John works as a project manager for BlueWell Inc. His project has a budget of $795,000 and he
has spent $325,000 on the project. But, he has completed only 40 percent of the project work till
now. Management wants to know what the project’s cost performance index is. What value will
John report?

A.
0.76

B.
0.85

C.
0.80

D.
0.92

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, it’s
EV = 0.40 * 750,000
= 300,000
CPI = EV/AC
= 300,000/325,000
= 0.92