What is Cost Performance Index (CPI)?
Definition and Purpose
The Cost Performance Index (CPI) is a project management metric that measures the efficiency of a project's cost performance.
It compares the actual cost of a project to the budget and provides insights into how well a project is being managed financially.
Calculating CPI
CPI is calculated as the ratio of Earned Value (EV) to Actual Cost (AC):
- CPI = EV / AC
Where:
- EV is the value of work completed
- AC is the actual cost of work completed
Interpreting CPI Values
- CPI > 1: Project is under budget
- CPI = 1: Project is on budget
- CPI < 1: Project is over budget
Factors Influencing CPI
Several factors can influence CPI, including:
- Scope changes
- Unforeseen costs
- Inefficient resource allocation li>Poor cost control
Importance of CPI
CPI is a critical metric for project managers because it helps them:
- Assess project cost performance
- Identify areas for improvement
- Forecast future costs and schedule variances
- Make informed decisions to improve project outcomes
Conclusion
CPI is a valuable tool for project managers to evaluate the cost performance of their projects and identify areas for improvement.
By understanding the concept, calculation, and interpretation of CPI, project managers can effectively manage their projects' budgets and ensure their successful completion.
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