Cost Performance Index (CPI) in Project Management | Learnerskart
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August 19, 2025
📊 Cost Performance Index (CPI) in Project Management
✅ What is CPI?
The Cost Performance Index (CPI) is a key metric in Earned Value Management (EVM) that measures the cost efficiency of a project.
Formula:
CPI = EV/AC
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EV (Earned Value): The value of work completed.
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AC (Actual Cost): The cost incurred for the completed work.
👉 CPI = 1 → On budget
👉 CPI > 1 → Under budget (efficient)
👉 CPI < 1 → Over budget (inefficient)
✅ Why is CPI Important?
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Tracks how efficiently the budget is being spent.
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Provides early warning for budget overruns.
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Aids in forecasting project costs (e.g., EAC – Estimate at Completion).
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Supports better decision-making for resource allocation.
✅ Benefits of CPI
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Objective Measurement → Removes guesswork in financial performance.
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Budget Control → Helps managers stay within financial limits.
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Forecasting Power → Predicts final project cost using real data.
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Stakeholder Confidence → Simplifies reporting with a single efficiency score.
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Comparability → Useful to compare cost performance across projects.
✅ When to Use CPI
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During Project Execution → To monitor if the project is financially on track.
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Periodic Reviews (weekly/monthly) → For trend analysis.
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Risk Management → To flag cost-related risks early.
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Forecasting Stage → To estimate the final budget outcome (EAC).
✅ Example
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EV = $100,000
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AC = $120,000
CPI = 100000/120000 = 0.83
👉 CPI < 1 → The project is over budget (spending more than planned).
💡 Pro Tip
Always analyze CPI in conjunction with SPI (Schedule Performance Index) for a comprehensive view of project health. A project can be under budget (CPI > 1) but still behind schedule (SPI < 1).
At LearnersKart, we don’t just teach formulas like CPI = EV ÷ AC. We train professionals to use CPI as a decision-making tool to control costs, forecast accurately, and deliver successful projects. That’s what makes the difference between passing an exam and excelling in your career
📍 Visit: www.learnerskart.com
📧 Email: info@learnerskart.com
Project Management, Project Managers, PMP Exam formula, What is CPI, Cost Performance Index in project management, CPI formula, Earned Value Management, project success, project cost efficiency, budget control, CPI Formula PMP, project forecasting, CPI vs SPI, LearnersKart PMP training
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“PMI®”, “PMBOK®”, “PMP®”, “CAPM®” and “PMI-ACP®” are registered marks of the Project Management Institute, Inc.
ITIL® and PRINCE2® are registered trade marks of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.
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