The project budget is set at $150,000. The project duration is planned to be one year. At the completion of Week 16 of the project, the following information is collected: Actual cost = $50,000 Plan…

Question

Options

• A0.80
• B0.89
• C1.13
• D1.25

• A
  79% (15)
• B
  5% (1)
• D
  16% (3)

Explanation

Option A (0.80) is correct because the Cost Performance Index (CPI) is calculated as Earned Value divided by Actual Cost: CPI = EV / AC = $40,000 / $50,000 = 0.80, indicating the project is getting only $0.80 of value for every $1 spent - meaning it is over budget.

Why the distractors are wrong:

• B (0.89) results from dividing EV by Planned Cost ($40,000 / $45,000), which confuses the CPI formula with a comparison to the plan - that's not a standard EVM metric.
• C (1.13) comes from dividing Planned Cost by EV ($45,000 / $40,000), inverting the relationship with the wrong inputs.
• D (1.25) is the inverse of the correct formula - AC / EV ($50,000 / $40,000) - a common error when the formula is remembered backwards.

Memory tip: Think "CPI = EV over AC" - Earned value is Efficiency's numerator, and Actual cost is what you Actually spent (denominator). A CPI below 1.0 always means over budget, which makes intuitive sense here since actual cost ($50k) exceeded earned value ($40k).

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