Which formula represents Cost Performance Index (CPI)?

The Cost Performance Index (CPI) is a crucial metric in project management that measures the cost efficiency and financial effectiveness of a project. Specifically, it is calculated by dividing Earned Value (EV) by Actual Cost (AC).

Earned Value represents the value of work actually performed up to a certain point in the project, while Actual Cost refers to the total costs incurred for the work completed at that point. By calculating the CPI using the formula ( CPI = EV / AC ), project managers can assess whether the project is under budget or over budget. A CPI of greater than 1 indicates that the project is performing well financially, as it means that the earned value exceeds actual costs. Conversely, a CPI of less than 1 indicates that the project is over budget.

Understanding this formula and its significance is essential for any professional involved in project management, as it allows for timely adjustments to be made in order to stay within budget and ensure project success.