Home » PMI » PMP v.2 » What is the CPI for this project, and what does it tell us about cost performance thus far?
You are using earned value progress reporting for your current project in an effort to teach your software developers the benefits of earned value. You plan to display project results on the cafeteria bulletin board so that the team knows how the project is progressing.
PV = $2,200
EV = $2,000
AC = $2,500
BAC = $10,000
What is the CPI for this project, and what does it tell us about cost performance thus far?
A. 0.20; actual costs are exactly as planned
B. 0.80; actual costs have exceeded planned costs
C. 0.80; actual costs are less than planned costs
D. 1.25; actual costs have exceeded planned costs
Correct Answer: B
Explanation/Reference:
CPI is calculated as EV/AC (in this case, $2,000/$2,500). EV measures the budgeted dollar value of the work that has actually been accomplished, whereas AC measures the actual cost of getting that work done. If the two numbers are the same, work on the project is being accomplished for exactly the budgeted amount of money (and the ratio will be equal to 1.0). If actual costs exceed budgeted costs (as in this example), AC will be larger than EV, and the ratio will be less than
1.0. CPI is also an index of efficiency. In this example, an index of 0.80 (or 80 percent) means that for every dollar spent on the project only 80 cents worth of work is actually accomplished.
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