John works as a Project Manager for Blue Well Inc. He is measuring cost efficiency of his project. The key values are provided in the table below: What is the cost performance index (CPI) of the…

Question

Options

• A0.96
• B1.082
• C0.833
• D1.0625

• A
  14% (4)
• B
  7% (2)
• C
  75% (21)
• D
  4% (1)

Explanation

According to the question, you are required to calculate the cost performance index (CPI) of the project. Cost performance index (CPI) is used to calculate performance efficiencies. It is used in trend analysis to predict future performance. CPI is the ratio of earned value to actual cost. The CPI is calculated based on the following formula: CPI = Earned Value (EV) / Actual Cost (AC) If the CPI value is greater than 1, it indicates better than expected performance, whereas if the value is less than 1, it shows poor performance. The CPI value of 1 indicates that the project is right on target. Here, CPI is as follows: CPI = EV / AV = 425/510 = 0.833 As the CPI (0.833) is less than 1, it shows that the schedule performance is below expectation. What is BCWP (or EV)? Budgeted cost of work performed (BCWP) or Earned Value (EV) is the value of completed work. It is the budgeted amount for the work actually completed on the schedule activity during a given time period. What is BCWS (or PV)? Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV) is the authorized budget assigned to the scheduled work to be accomplished for a schedule activity or Work Breakdown Structure (WBS) component. What is ACWP (or AC)? Actual cost of work performed (ACWP) or Actual Cost (AC) is the total costs actually incurred and accomplishing work performed during a given time period for a schedule activity. It is the cost of the work to date, including direct and indirect costs. AC is money that has actually been expended to date.

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