Cost Performance Index (CPI) for PMP® Exam Prep - Project ...

“The Cost Performance Index (CPI) is a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost.” Whereas that ... AProjectManagementProfessional(PMP)®ExamPrepProvider ContactUs (877)637-0450 MyAccount +Educate360Brands Fromfundamentalstoexamprepbootcamps,Educate360partnerswithyourteamtomeetyourorganization'strainingneedsacrossProjectManagement,Agile,BusinessAnalysis,BusinessManagement,andLeadershipskillsdevelopment. Explore OurBrands Explore Explore Explore Explore Explore Explore Explore Explore MENU PMP®Certification PMPCertification PMPCertificationProcess PMPCertificationTraining(LiveClassrooms) PMPCertificationTraining(OnlineClassrooms) PMPCourseMaterials PMPCertificationRequirements PMPCourseSchedule LearnMoreAbout... HowtoEarn35ContactHours GroupTraining Reviews FAQs DiscountforMilitary/Veterans DiscountsforUnemployedProfessionals WhyProjectManagementAcademy? QualityTrainingwithExpertInstructors PMIVerifiedAuthorizedTrainingPartner 100%Money-BackGuarantee Thousandsof5-StarReviews TheMostLiveClassroomLocationsNationwide TheLargestVarietyofOnlineClassroomOptions "PMAprovidesaremarkableproductandstandsbehinditwithaperformanceguarantee.Ipassedthetestonthefirstattempt!"-Dennis MoreReviews OnlineClassrooms LiveClassrooms AgileCertification PMI-ACPAgileCertifiedPractitioner PMI-ACPCertificationTrainingCourses PMI-ACPCertificationRequirements GroupTraining FAQs ScrumCertifications CertifiedScrumMaster(CSM) AdvancedCertifiedScrumMaster(A-CSM) CertifiedScrumProductOwner(CSPO) AdvancedCertifiedScrumProductOwner(A-CSPO) OtherAgileCourses SAFeCertifications DisciplinedAgileScrumMaster(DASM)Certification AgileChangeAgent CertifiedProductInnovationProfessional(CPIP) AgileFundamentals AgileinAction WhatisAgileMethodology? Teamsoperateinshortcyclesaimedatcontinuousimprovement.Whyisthisbeneficial? AnIntroductiontoAgileProjectManagement ThereareseveralvariationsonAgile,someofwhichinclude... ReadMore LearnaboutAgile AllTrainingCourses SeeAllTrainingCourses ProjectManagementTraining ProjectManagementProfessional(PMP)® CAPMCertificationTraining PMI-RMPCertification PMI-SPCertification Master'sCertificationinPM FundamentalBusinessPracticesCertificate ThePMITalentTriangle® ProjectManagementFundamentals BusinessAnalysis CertifiedBusinessAnalysisProfessional(CBAP)® CertificationofCapabilityinBusinessAnalysis(CCBA)® PMIProfessionalinBusinessAnalysis(PMI-PBA)® Additionalskills-basedcourseshostedbyoursistercompany,WatermarkLearning AgileCertification PMIAgileCertifiedPractioner(PMI-ACP)® CertifiedScrumMaster(CSM) AdvancedCertifiedScrumMaster(A-CSM) CertifiedScrumProductOwner(CSPO) AdvancedCertifiedScrumProductOwner(A-CSPO) SAFeCertifications DisciplinedAgileScrumMaster(DASM)Certification AgileChangeAgent CertifiedProductInnovationProfessional(CPIP) AgileFundamentals AgileinAction QualityManagement LeanSixSigmaGreenBelt LeanSixSigmaYellowBelt Accelerateyourcareerthroughexclusiveaccesstotraining,discounts,jobs,tools,andprofessionaldevelopmentopportunitiestoboosttheirskills,jobimpact,andcareerprospects. MaintainyourcertificationwithPDUs,presentations,andwebinars. Getdiscountsoncontinuededucationandprofessionaldevelopmentcourses. GainexposuretoPMtoolsandsoftwaretohelpimproveyourjobperformance. AccesstoPMjobpostingsandrecruiterstohelpyoulandtherightjob. Browseallofouravailablecertificationandprofessionaldevelopmentcourses. SeeAllCourses LearnMore CorporateTraining CorporateTrainingSolutions Ourcustomprogramsfocusonimprovingbusinesssuccessbyteachingyourentireteam. CorporateTrainingSolutionsandCourses OurInstructors Reviews Customers BenefitsofCorporateTraining Developingemployeesisoneofthemostimportantthingsthatyoucandotodrivebusinesssuccess.PMAcanhelpaccelerateyourlearning&developmentgoals! LearnHow 5CorporateTrainingBestPractices Findingqualitycorporatetrainingsolutionstakesmorethanaquickinternetsearch... Requestaquoteorspeaktooneofourtrainingadvisors. RequestInfo ReadourBlog PDUCourses PDUContinuingEducation MaintainYourPMICertificationswithPDUs OnlinePDUCourseLibrary LivePDUCourseLibrary RecommendedPDULearningCategories PopularOn-DemandPDUCourses LeadingVirtualTeams MicrosoftProject OrganizationalReadiness SeeAllOn-DemandPDUCourses PopularLivePDUCourses LeanSixSigmaGreenBelt FacilitationSkillsWorkshop BulidingBetterBusinessCases SeeAllLive,VirtualPDUCourses PMIApprovedPDUCourses AsaPMIAuthorizedTrainingPartner(ATP),allourcoursesarepre-approvedforProfessionalDevelopmentUnits(PDUs)tohelpyoumaintainyourhard-earnedPMIcertifications. ThroughPMAandoursisterbrand,WatermarkLearning,youcanmaintainyourcertificationswhilecontinuouslyenhancingyourknowledgeandskillsetstomakeyouaneffectiveProjectManager! HowDoIMaintainMyPMPCertification?ATutorialonPDUs ContinuingeducationisanessentialpartofaPM’sprofessionaldevelopment... ReadMore OnlinePDUCourseCatalog FreeResources FreeResources ProjectManagementResourceCenter ProjectManagementArticles ProjectQualityManagementforPMP HowtoEarn35ContactHoursforPMP FreePMPPracticeExamQuestions PMAccelerate TerminologyGames ProjectManagementFormulasforPMP More AboutPMA ReadOurBlog SearchforProjectManagementJobs Press&Media PromotionsandDiscounts CharitableContributions JointhePMATeam DoYouQualifyforthePMPCertification FindoutrightnowifyoumightbeeligibletositforthePMPexam. TakeafreePMPpracticeexamnow! Start ReadtheArticle ReadourBlog ▲ Skiptocontent Home»Resources»PMPFormulas»CostPerformanceIndex(CPI)forPMP®ExamPrep CostPerformanceIndex(CPI)forPMP®ExamPrep Anyoneinaprojectmanagementroleknowsthetopquestionsaskedbythecustomer(orboss)willbe:“whenwillitbedone?”and“howmuchwillitcost?”Althoughprojectmanagersdonothaveacrystalballtoseeintothefuture,thereareprovenformulastoprovidedata-basedpredictionsforscheduleandcost.TheProjectManagementInstitute(PMI)®’sProjectManagementProfessional(PMP)®examincludesquestionsaroundthedefinition,purpose,andcalculationofprojectmanagementformulasusedtoassesscostandschedule,includingtheCostPerformanceIndex. Onthispage: CostPerformanceIndex(CPI)DefinedCostPerformanceIndexFormulaCalculatingCostPerformanceIndexCostPerformanceIndexCalculationExamplesSchedulePerformanceIndex(SPI)andCPICostFormulasforPMP®ExamPreparationPMP®CertificationExamCPISampleQuestions CostPerformanceIndex(CPI)Defined TheAGuidetotheProjectManagementBodyofKnowledge(PMBOK®Guide)–SeventhEdition,offersthisdefinitionofCostPerformanceIndex(CPI):  “TheCostPerformanceIndex(CPI)isameasureofthecostefficiencyofbudgetedresources,expressedasaratioofearnedvaluetoactualcost.” WhereasthatCPIPMP®definitionisimportanttoknowforthePMP®certificationexam,itisnotadescriptionthatwillhelpnon-projectmanagersunderstandthevalueoftheformula.Inbasicterms,theCPIshowshowwelltheprojectisstickingtothebudget.TocalculatetheCPI,aprojectmanagermusthaveanunderstandingoftheCPIformulaandtheformulasthatcompriseit. CostPerformanceIndexFormula TheCPIformulaforthePMP®examiscalculatedwiththeEarnedValue(EV)andActualCost(AC).Eachvaluehasaformula,whichwillbeembeddedinPMP®examquestions. Somemayrefertothisformulaasthe“PMPCostPerformanceIndex”butthatisonlyduetotheinclusionofthetoolwithinthePMP®certificationexam.AnyonewithprojectmanagementresponsibilitiescanusetheCostPerformanceIndex(CPI)calculationtobettermanagetheirscheduleandbudget. CalculatingCostPerformanceIndex CalculatingCostPerformanceIndexprovidesinsightintothebudgethealthoftheproject.UsingtheformulaCPI=EV/AC,theprojectmanagerwillhaveavalueoflessthan1(projectoverbudget),of1(projectonbudget),orgreaterthan1(projectunderbudget). <1=1>1OVERBUDGETONBUDGETUNDERBUDGETCostPerformanceIndexValueMeanings CPIinprojectmanagementmeasuresthecostefficiencyofaproject.WithorwithoutaPMP®certification,ProjectManagerscanusetheCPItotelltheoverallstoryoftheprojectstatusfromafinancialperspective.TheCPIcouldindicatetheinitialbudgetwasnotalignedwiththeprojectoutcomesorestimatesweretooconservative.TheCPIisalsousedtoprojectcostincurrenceforthefutureperiodsofaproject,e.g.inthecontextofre-estimationofbudgets. CostPerformanceIndexCalculationExamples CalculatingtheCPIisnotacomplicatedmathematicalprocess,itismerelysimpledivisionandknowledgeofhowtointerprettheresultingdata.ConsidertheseexamplesfromvariousprojectmanagementandPMP®examresources. BathroomRenovationCPI Asimpleexampleisaresidentialbathroomrenovationproject,inwhichthereisanoverall$1,500andis40%complete.Actualcoststodatehavebeen$900. TheCPIis(.67),avaluelessthanoneindicatingtheprojectisoverbudgetby33%(100–67=33).Withthisknowledge,thePMP®credentialholderknowschangesareneededtomitigatecostoverruns. GeneralBusinessProjectExample1 YouareaProjectManagerwithaPMP®certificationandabusinessprojecttocomplete.Yourprojecthasabudgetof$10,000andyoudeterminedtheactualcosttocurrentlybe$8,000.UsingtheCPIformula,youdetermine: CPIof1.25,whichmeanstheprojectis25%underbudget(the.25above1).Yes,theProjectManagershouldberelieved,butbeingunderbudgetatapointisnotaguaranteeforsuccess.ThetrainingandexperienceneededtobecomeaPMP®credentialholdermeanstheProjectManagerwilllooktoseeiftheunderbudgetindicatespoorestimatingorcoststhathavebeendeferredbutwillbeincurredlater.Itcouldbeeverythingontheprojectisgoingbetterthaneverplanned;however,asavvyprojectmanagerwillusetheCPIandotherformulastomonitorprogressandadjustaccordingly. GeneralBusinessProjectExample2 DeterminetheCostPerformanceIndex(CPI)andiftheprojectisunder,at,oroverbudget. Yourprojecthasaone-yeartimelineandyouareatthehalfwaypoint.Theprojectbudgetis$100,000with40%oftheworkcompleted. Fromthatdescription,youhavethisinformation: Timelineof12monthsActualCost(AC)=60,000USDEarnedValue(EV)=40%of100,000USD=40,000USD Inthisscenario,theprojectmanagercanusethesameCPIformulaforthePMP®exam,inthatCV=AC/EV. TheCostPerformanceIndexis0.67,whichislessthan1.Yourprojectisearning0.67USDforevery1USDspentsincetheCPIislessthanone;theprojectisoverbudget.Theformula,informallyreferredtoasthe“PMPCostPerformanceIndex”givesdata-driveninsightintothebudget’shealth.Itdoesnotindicatetherootcauseforthebudgetvariancenorofferanyclueastotheneededorpossiblemitigation.OthertoolsandresourceswithinthePMBOK®GuideandPMIstandardsservethatpurposeforPMP®credentialholders. SchedulePerformanceIndex(SPI)andCPI AreviewoftheCPIisincompletewithoutaddressingtheSchedulePerformanceIndex(SPI).While,theCPIspeakstobudgetvariance,SPIprovidesinsightintoschedulevariance.ThereisaformulaspecifictotheSPIandthoseseekingtosuccessfullypassthePMP®examshouldknowhowtocalculatetheSPI. TheformulaforSPIusesEarnedValueandPlannedValue. TheSPIiscalculatedbydividingtheEVbyPV.TheresultingSPIvalueisinterpretedliketheCPIinitsvariancefrom1. <1=1>1BehindscheduleOnscheduleAheadofscheduleSchedulePerformanceIndexValueMeanings SPIandCPIarekeycalculationsinEarnedValueManagementandarecriticalconceptsforthePMP®certificationexam. Althoughitshighlyunlikely,studentsmaybeaskedtodostraightforwardcalculationsofeithertheCPIortheSPIaspartofthePMP®exam,withnumbersnotnecessitatingtheuseofacalculator.Additionally,inboththecontextofthePMP®examsettingandlaterasanactivePMP®credentialholder,theProjectManagershouldbeabletointerpretwhattheCPIandSPImeantoaproject’sscheduleandbudgetrespectively. ThesmallbusinesswebsiteChronprovidesthisexampleofhowonedeterminestheSPIandCPIinagivensetting. “…aprojecthastwopeopleworkingfulltime,andthateachpersoncoststhecompany $1,250 aweek.Aprojectisoneweekbehindatthetimeofthecalculation.Oneweektimestwopeopleat $1,250 aweekequals $2,500,whichrepresentstheamountbywhichthescheduleisbehind.Ifthebudgetedcostofworkscheduledatthattimeis $6,000,yousubtractthe $2,500 fromthatcosttocomeupwiththebudgetedcostofworkperformedat $3,500.Dividing $3,500 by $6,000 producesanSPIof0.53.AswiththeCPI,SPIvaluesunder1arenotgoodbecausetheymeantheprojectisbehindschedule.Avalueof1meanstheprojectisonschedule,andavaluemorethan1meanstheprojectisaheadofschedule.”–Source:Chron.com TheSPIandCPIPMP®examquestionswillrequireknowledgeofhowtheformulasarecalculated,howtointerprettheresultingvalue,andhoweachisusedduringthelifeofaproject. CostFormulasforPMP®ExamPreparation Thereare25formulasthatmaybeincludedorreferencedonthePMP®certificationexam,speakingtotherangeofknowledgeaprojectmanagerneedsinanybusinesssetting.TheCPIandSPIformulasdiscussedhereinarepartofwhatisknownasEarnedValuecalculations.InthePMIarticle“Howtomakeearnedvalueworkonyourproject,”thetoptenitemsforimplementingearnedvaluearelistedas: ProjectRequirementsWorkBreakdownStructureChangeManagementProcessIntegratedProjectPlanCorrectScheduleandBudgetScheduleandBudgetContingencyContingencyManagementCostCollectionSystemAccurateReportedProgressManagementSupport PreparationforthePMP®certificationexamshouldincludeEarnedValueformulasandtheirconnectiontoprojectmanagementprocesses,tools,knowledgeareas,andresources. PMP®CertificationExamCPISampleQuestions QuestionABCD1.Youjustpickedupanewprojectfromadepartingprojectmanager.Youmeetwithherbeforeherdeparturetodiscusstheperformanceoftheproject.Shementionsthattheschedulehasbeenchallengingandhasusedfast-trackingtostayonschedule.Sheisunsureaboutthebudgetsinceon-timedeliverywasaprimaryconcern.ShetellsyouthatEVis20andACis$20.WhatisyourCPI?4121.252.Reportingtheprojectperformanceisarequiredtaskasperyourcontract.Youhavecalculatedearnedvaluemeasuresandreportthemtoyourstakeholders.BAC=$20,000;PV=$18,600;EV=$17,500;AC=$17,000;CPI=1.03;SPIis0.94;EACis$19,400;ETCis$2,400.Whatdothesefigurestellyouaboutyourprojectperformancetodate?ThebudgetatcompletionislessthantheestimateatcompletionsowewillspendmorethanweplannedandneedtogetapprovalYouarebehindscheduleandoverbudgetsoweneedtoestablishnewcostandschedulebaselinesimmediatelyTheestimateatcompletionisovertheoriginalbudgetThecostperformanceindextellsusthatwearegettingagoodreturnforthemoneyspentontheprojectsofarbutwearebehindschedule StudyingforthePMPExam? PracticeQuestionsforPMPFormulas Answers B.TheformulaforCPIisEV/AC.Inthiscase,thatis20/20,or1.0,andyouareonbudget.ChoiceDiscorrect.CPIgreaterthan1indicatesweareperformingbetterthanplannedwithregardtocosts,andanSPI<1indicateswearebehindschedule. Conclusion ProjectmanagersshouldbeabletodetermineSPIandCPIfortheirprojects.Theformulaisstraightforward,andwithaccuratenumbers,canbecalculatedquickly.TheinterpretationoftheresultingfigureforbothSPIandCPIisrelativelysimple.Ittakesadepthofprojectmanagementexperienceandknowledgetoknowwhatactionstotakeandhowtousethesescheduleandcostinsightstomakeadjustmentsleadingtoprojectsuccess. UpcomingPMPCertificationTraining–Live&OnlineClasses NameDatePlacePMPCertificationTrainingJan31,Feb1,2,38:30am-6:00pmBirmingham,ALViewDetails PMPCertificationTrainingApr18,19,20,218:30am-6:00pmBirmingham,ALViewDetails PMPCertificationTrainingJan10-13&17-201:00pm-5:30pmOnline-UK/Ireland(GMT)ViewDetails Abouttheauthor Relatedposts MeganBell ProjectManager&Writer at ProjectManagementAcademy MeganBell #molongui-disabled-link RiskAuditvsRiskReview MeganBell #molongui-disabled-link TheRiskReportinProjectManagement MeganBell #molongui-disabled-link IntroductiontoEventandNon-EventRiskonthePMPExam MeganBell #molongui-disabled-link IntrotoRiskAuditsinProjectManagement MeganBell Postnavigation UseYourPMP®CertificationToPrepareforProgramandPortfolioManagementTheExecutiveSponsorintheProjectEconomy Receiveournewslettertostayontopofthelatestposts Searchfor: Categories Agile ContinuingEducation CorporateTraining DisciplinedAgile LeanSixSigma PMBOKGuide PMI-ACP PMPCertification PMPExamPrep PMPFormulas PMPQuality ProfessionalDevelopment ProjectManagement RiskManagement ScaledAgileFramework TrainingandDevelopment ©2008-2022ProjectManagementAcademy®.Allrightsreserved. TermsofUse Policies PrivacyStatement ContactUs PMI,PMBOK,PMP,CAPM,PMI-ACP,PMI-RMP,PMI-SP,PMI-PBA,ThePMITALENTTRIANGLEandthePMITalentTrianglelogo,andthePMIRegisteredEducationProviderlogoareregisteredmarksoftheProjectManagementInstitute,Inc.|PMIATPProviderID#3348 ThePMIATPsealisaregisteredmarkoftheProjectManagementInstitute,Inc. IIBA®,BABOK®GuideandBusinessAnalysisBodyofKnowledge®areregisteredtrademarksownedbyInternationalInstituteofBusinessAnalysis.CBAP®andCCBA®areregisteredcertificationmarksownedbyInternationalInstituteofBusinessAnalysis.ThesetrademarksareusedwiththeexpresspermissionofInternationalInstituteofBusinessAnalysis. ITIL®isaRegisteredTrademarkofAXELOSLimited.TheSwirllogo™isatrademarkofAXELOSLimited. ProjectManagementAcademy®,PMA®,themosttrustednameinprojectmanagementtraining®,andSeniorCertifiedProjectManager®areregisteredmarksofEducate360,LLC.