PK0-003 · Question #80
A project with a projected budget of $100,000 is 75% complete and has a CPI of .85. Which of the following is TRUE regarding this project?
The correct answer is B. The project is currently in cost overrun. The Cost Performance Index (CPI) measures the cost efficiency of budgeted resources; a CPI less than 1.0 indicates that the project is over budget or experiencing a cost overrun.
Question
A project with a projected budget of $100,000 is 75% complete and has a CPI of .85. Which of the following is TRUE regarding this project?
Options
- AMore project work than projected has been completed
- BThe project is currently in cost overrun
- CThe project EV is 63.75
- D$85,000 has been spent in the project
How the community answered
(30 responses)- A3% (1)
- B70% (21)
- C10% (3)
- D17% (5)
Why each option
The Cost Performance Index (CPI) measures the cost efficiency of budgeted resources; a CPI less than 1.0 indicates that the project is over budget or experiencing a cost overrun.
The statement that the project is 75% complete refers to schedule progress or physical completion, not necessarily that more work than projected has been completed. CPI relates to cost efficiency.
A CPI (Cost Performance Index) of less than 1.0 (in this case, 0.85) indicates that the project is performing poorly on cost, meaning that the actual cost for the work performed is greater than the budgeted cost, which signifies a cost overrun.
The Earned Value (EV) is calculated as % complete multiplied by the Budget at Completion (BAC), which is 0.75 * $100,000 = $75,000, not $63.75.
Given CPI = EV / AC, and EV is $75,000, then Actual Cost (AC) = EV / CPI = $75,000 / 0.85 which is approximately $88,235.29, not $85,000.
Concept tested: Earned Value Management - Cost Performance Index (CPI)
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