What is the formula for Cost Performance Index (CPI)?

The Cost Performance Index (CPI) is a crucial metric in project management that helps assess the cost efficiency of a project. The formula for CPI is derived from the relationship between Earned Value (EV) and Actual Cost (AC).

In this context, CPI is calculated as the ratio of Earned Value to Actual Cost, which gives a measure of how well the project is performing against its budget. A CPI greater than 1 indicates that the project is under budget, while a CPI less than 1 signals that the project is over budget.

This formula is fundamental because it allows project managers to make informed decisions about resource allocation, cost control, and overall project performance. Understanding the CPI assists in evaluating whether the project is proceeding as planned in terms of costs, making it an essential concept for those preparing for the AACE Planning & Scheduling Professional (PSP) Certification.