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What is the Cost Performance Index (CPI)?
The Cost Performance Index (CPI) is a metric used in project management to measure how efficiently the project’s budget is being utilized. It tells you whether you are getting good value (or performance) from the money spent.
CPI Calculator
How It Works?
- Formula:
- Earned Value (EV): The value of the work actually completed so far.
- Actual Cost (AC): The money spent on the project so far.
2. Results Interpretation:
- CPI = 1: You’re perfectly on budget. Every dollar spent matches the work completed.
- CPI > 1: You’re under budget. You’re getting more work done for less money.
- CPI < 1: You’re over budget. You’re spending more money than the work completed.
What It Can Be Used For
- Budget Management: Helps project managers see how well the project’s funds are being used.
- Performance Tracking: A quick way to check if the project is progressing efficiently or if adjustments are needed.
- Forecasting: Helps predict future costs based on current performance trends.
- Decision-Making: Guides decisions about whether to cut costs, adjust the scope, or allocate more resources.
Let us try to learn through an Example
If
- Earned Value (EV): $80,000
- Actual Cost (AC): $100,000
A CPI of 0.8 means you are spending $1.25 for every $1 of work completed, indicating the project is over budget.
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