What is the Cost Performance Index for this project to determine if the contingency response should happen?

You are the project manager of the NHQ project for your company. Management has told you that you must implement an agreed upon contingency response if the Cost Performance Index in your project is less than 0.90. Consider that your project has a budget at completion of $250,000 and is 60 percent complete. You are scheduled to be however, 75 percent complete, and you have spent $165,000 to date. What is the Cost Performance Index for this project to determine if the contingency response should happen?

A.
0.91

B.
-$37,500

C.
0.88

D.
0.80

Explanation:

The cost performance index is 0.9 so the contingency response does not need to be implemented. You can find the cost performance index by dividing the earned value by the actual costs. In this instance it is: CPI = 150,000/165,000= 0.91 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.

Answer option B is incorrect. -$37,500 is the project’s schedule variance.

Answer option D is incorrect. 0.80 represents the project’s schedule performance index.

Answer option C is incorrect. 0.88 is not a valid earned value management calculation.

Reference: "Project Management Body of Knowledge (PMBOK Guide), Fourth Edition"