You work as a Project Manager for Tech Media Inc. Several projects are running under your
supervision. Rick, team leader of a project, provides you performance indexes of his project. The cost
performance index (CPI) of his project is 1.135. What does this figure depict?
A.
The cost performance is right on target.
B.
The cost performance is below the expectation.
C.
The cost performance is better than expected.
D.
The project is behind the schedule.
Explanation:
According to the question, the CPI value of Rick’s project is 1.135. This figure is greater than 1.
Hence, it shows that the cost performance is better than expected.
What is CPI?
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 options B and A are incorrect. The CPI value 1 and below 1 depicts that the cost performance
is right on target and below expectation respectively.
Answer option D is incorrect. CPI has nothing to do with the schedule. It is schedule variance (SV)
that tells that the schedule is ahead or behind the plan.