Cost Performance Index (CPI) for PMP® Exam Prep - Project ...

“The Cost Performance Index (CPI) is a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost.” Whereas that ... AProjectManagementProfessional(PMP)®ExamPrepProviderContactUs(877)637-0450MyAccount+Educate360BrandsFromfundamentalstoexamprepbootcamps,Educate360partnerswithyourteamtomeetyourorganization'strainingneedsacrossProjectManagement,Agile,BusinessAnalysis,BusinessManagement,andLeadershipskillsdevelopment.ExploreOurBrandsExploreExploreExploreExploreExploreExploreExploreExploreMENUPMP®CertificationPMPCertificationPMPCertificationTraining(LiveClassrooms)PMPCertificationTraining(OnlineClassrooms)PMPCourseMaterialsPMPCertificationRequirementsPMPCourseScheduleLearnMoreAbout...HowtoEarn35ContactHoursGroupTrainingReviewsFAQsDiscountforMilitary/VeteransDiscountsforUnemployedProfessionalsWhyProjectManagementAcademy?QualityTrainingwithExpertInstructorsPMIVerifiedAuthorizedTrainingPartner100%Money-BackGuaranteeThousandsof5-StarReviewsTheMostLiveClassroomLocationsNationwideTheLargestVarietyofOnlineClassroomOptions"PMAprovidesaremarkableproductandstandsbehinditwithaperformanceguarantee.Ipassedthetestonthefirstattempt!"-DennisMoreReviewsOnlineClassroomsLiveClassroomsAgileCertificationPMI-ACPAgileCertifiedPractitionerPMI-ACPCertificationTrainingCoursesPMI-ACPCertificationRequirementsGroupTrainingFAQsScrumCertificationsCertifiedScrumMaster(CSM)AdvancedCertifiedScrumMaster(A-CSM)CertifiedScrumProductOwner(CSPO)AdvancedCertifiedScrumProductOwner(A-CSPO)OtherAgileCoursesSAFeCertificationsDisciplinedAgileScrumMaster(DASM)CertificationAgileChangeAgentCertifiedProductInnovationProfessional(CPIP)AgileFundamentalsAgileinActionWhatisAgileMethodology?Teamsoperateinshortcyclesaimedatcontinuousimprovement.Whyisthisbeneficial?AnIntroductiontoAgileProjectManagementThereareseveralvariationsonAgile,someofwhichinclude...ReadMoreLearnaboutAgileAllTrainingCoursesSeeAllTrainingCoursesProjectManagementTrainingProjectManagementProfessional(PMP)®CAPMCertificationTrainingPMI-RMPCertificationPMI-SPCertificationMaster'sCertificationinPMFundamentalBusinessPracticesCertificateThePMITalentTriangle®ProjectManagementFundamentalsBusinessAnalysisCertifiedBusinessAnalysisProfessional(CBAP)®CertificationofCapabilityinBusinessAnalysis(CCBA)®PMIProfessionalinBusinessAnalysis(PMI-PBA)®Additionalskills-basedcourseshostedbyoursistercompany,WatermarkLearningAgileCertificationPMIAgileCertifiedPractioner(PMI-ACP)®CertifiedScrumMaster(CSM)AdvancedCertifiedScrumMaster(A-CSM)CertifiedScrumProductOwner(CSPO)AdvancedCertifiedScrumProductOwner(A-CSPO)SAFeCertificationsDisciplinedAgileScrumMaster(DASM)CertificationAgileChangeAgentCertifiedProductInnovationProfessional(CPIP)AgileFundamentalsAgileinActionQualityManagementLeanSixSigmaGreenBeltLeanSixSigmaYellowBeltAccelerateyourcareerthroughexclusiveaccesstotraining,discounts,jobs,tools,andprofessionaldevelopmentopportunitiestoboosttheirskills,jobimpact,andcareerprospects.MaintainyourcertificationwithPDUs,presentations,andwebinars.Getdiscountsoncontinuededucationandprofessionaldevelopmentcourses.GainexposuretoPMtoolsandsoftwaretohelpimproveyourjobperformance.AccesstoPMjobpostingsandrecruiterstohelpyoulandtherightjob.Browseallofouravailablecertificationandprofessionaldevelopmentcourses.SeeAllCoursesLearnMoreCorporateTrainingCorporateTrainingSolutionsOurcustomprogramsfocusonimprovingbusinesssuccessbyteachingyourentireteam.CorporateTrainingSolutionsandCoursesOurInstructorsReviewsCustomersBenefitsofCorporateTrainingDevelopingemployeesisoneofthemostimportantthingsthatyoucandotodrivebusinesssuccess.PMAcanhelpaccelerateyourlearning&developmentgoals!LearnHow5CorporateTrainingBestPracticesFindingqualitycorporatetrainingsolutionstakesmorethanaquickinternetsearch...Requestaquoteorspeaktooneofourtrainingadvisors.RequestInfoReadourBlogPDUCoursesPDUContinuingEducationMaintainYourPMICertificationswithPDUsOnlinePDUCourseLibraryLivePDUCourseLibraryRecommendedPDULearningCategoriesPopularOn-DemandPDUCoursesLeadingVirtualTeamsMicrosoftProjectOrganizationalReadinessSeeAllOn-DemandPDUCoursesPopularLivePDUCoursesLeanSixSigmaGreenBeltFacilitationSkillsWorkshopBulidingBetterBusinessCasesSeeAllLive,VirtualPDUCoursesPMIApprovedPDUCoursesAsaPMIAuthorizedTrainingPartner(ATP),allourcoursesarepre-approvedforProfessionalDevelopmentUnits(PDUs)tohelpyoumaintainyourhard-earnedPMIcertifications.ThroughPMAandoursisterbrand,WatermarkLearning,youcanmaintainyourcertificationswhilecontinuouslyenhancingyourknowledgeandskillsetstomakeyouaneffectiveProjectManager!HowDoIMaintainMyPMPCertification?ATutorialonPDUsContinuingeducationisanessentialpartofaPM’sprofessionaldevelopment...ReadMoreOnlinePDUCourseCatalogFreeResourcesFreeResourcesProjectManagementResourceCenterProjectManagementArticlesProjectQualityManagementforPMPHowtoEarn35ContactHoursforPMPFreePMPPracticeExamQuestionsPMAccelerateTerminologyGamesProjectManagementFormulasforPMPMoreAboutPMAReadOurBlogSearchforProjectManagementJobsPress&MediaPromotionsandDiscountsCharitableContributionsJointhePMATeamDoYouQualifyforthePMPCertificationFindoutrightnowifyoumightbeeligibletositforthePMPexam.TakeafreePMPpracticeexamnow!StartReadtheArticleReadourBlog▲Foralimitedtimesave$200offanyofourqualitytrainingprogramsover$1195.UsecouponcodeHOLIDAYS200atcheckoutCodecopiedtoyourclipboardSkiptocontentHome»Resources»PMPFormulas»CostPerformanceIndex(CPI)forPMP®ExamPrepCostPerformanceIndex(CPI)forPMP®ExamPrepAnyoneinaprojectmanagementroleknowsthetopquestionsaskedbythecustomer(orboss)willbe:“whenwillitbedone?”and“howmuchwillitcost?”Althoughprojectmanagersdonothaveacrystalballtoseeintothefuture,thereareprovenformulastoprovidedata-basedpredictionsforscheduleandcost.TheProjectManagementInstitute(PMI)®’sProjectManagementProfessional(PMP)®examincludesquestionsaroundthedefinition,purpose,andcalculationofprojectmanagementformulasusedtoassesscostandschedule,includingtheCostPerformanceIndex.Onthispage:CostPerformanceIndex(CPI)DefinedCostPerformanceIndexFormulaCalculatingCostPerformanceIndexCostPerformanceIndexCalculationExamplesSchedulePerformanceIndex(SPI)andCPICostFormulasforPMP®ExamPreparationPMP®CertificationExamCPISampleQuestionsCostPerformanceIndex(CPI)DefinedTheAGuidetotheProjectManagementBodyofKnowledge(PMBOK®Guide)–SeventhEdition,offersthisdefinitionofCostPerformanceIndex(CPI): “TheCostPerformanceIndex(CPI)isameasureofthecostefficiencyofbudgetedresources,expressedasaratioofearnedvaluetoactualcost.”WhereasthatCPIPMP®definitionisimportanttoknowforthePMP®certificationexam,itisnotadescriptionthatwillhelpnon-projectmanagersunderstandthevalueoftheformula.Inbasicterms,theCPIshowshowwelltheprojectisstickingtothebudget.TocalculatetheCPI,aprojectmanagermusthaveanunderstandingoftheCPIformulaandtheformulasthatcompriseit.CostPerformanceIndexFormulaTheCPIformulaforthePMP®examiscalculatedwiththeEarnedValue(EV)andActualCost(AC).Eachvaluehasaformula,whichwillbeembeddedinPMP®examquestions.Somemayrefertothisformulaasthe“PMPCostPerformanceIndex”butthatisonlyduetotheinclusionofthetoolwithinthePMP®certificationexam.AnyonewithprojectmanagementresponsibilitiescanusetheCostPerformanceIndex(CPI)calculationtobettermanagetheirscheduleandbudget.CalculatingCostPerformanceIndexCalculatingCostPerformanceIndexprovidesinsightintothebudgethealthoftheproject.UsingtheformulaCPI=EV/AC,theprojectmanagerwillhaveavalueoflessthan1(projectoverbudget),of1(projectonbudget),orgreaterthan1(projectunderbudget).<1=1>1OVERBUDGETONBUDGETUNDERBUDGETCostPerformanceIndexValueMeaningsCPIinprojectmanagementmeasuresthecostefficiencyofaproject.WithorwithoutaPMP®certification,ProjectManagerscanusetheCPItotelltheoverallstoryoftheprojectstatusfromafinancialperspective.TheCPIcouldindicatetheinitialbudgetwasnotalignedwiththeprojectoutcomesorestimatesweretooconservative.TheCPIisalsousedtoprojectcostincurrenceforthefutureperiodsofaproject,e.g.inthecontextofre-estimationofbudgets.CostPerformanceIndexCalculationExamplesCalculatingtheCPIisnotacomplicatedmathematicalprocess,itismerelysimpledivisionandknowledgeofhowtointerprettheresultingdata.ConsidertheseexamplesfromvariousprojectmanagementandPMP®examresources.BathroomRenovationCPIAsimpleexampleisaresidentialbathroomrenovationproject,inwhichthereisanoverall$1,500andis40%complete.Actualcoststodatehavebeen$900.TheCPIis(.67),avaluelessthanoneindicatingtheprojectisoverbudgetby33%(100–67=33).Withthisknowledge,thePMP®credentialholderknowschangesareneededtomitigatecostoverruns.GeneralBusinessProjectExample1YouareaProjectManagerwithaPMP®certificationandabusinessprojecttocomplete.Yourprojecthasabudgetof$10,000andyoudeterminedtheactualcosttocurrentlybe$8,000.UsingtheCPIformula,youdetermine:CPIof1.25,whichmeanstheprojectis25%underbudget(the.25above1).Yes,theProjectManagershouldberelieved,butbeingunderbudgetatapointisnotaguaranteeforsuccess.ThetrainingandexperienceneededtobecomeaPMP®credentialholdermeanstheProjectManagerwilllooktoseeiftheunderbudgetindicatespoorestimatingorcoststhathavebeendeferredbutwillbeincurredlater.Itcouldbeeverythingontheprojectisgoingbetterthaneverplanned;however,asavvyprojectmanagerwillusetheCPIandotherformulastomonitorprogressandadjustaccordingly.GeneralBusinessProjectExample2DeterminetheCostPerformanceIndex(CPI)andiftheprojectisunder,at,oroverbudget.Yourprojecthasaone-yeartimelineandyouareatthehalfwaypoint.Theprojectbudgetis$100,000with40%oftheworkcompleted.Fromthatdescription,youhavethisinformation:Timelineof12monthsActualCost(AC)=60,000USDEarnedValue(EV)=40%of100,000USD=40,000USDInthisscenario,theprojectmanagercanusethesameCPIformulaforthePMP®exam,inthatCV=AC/EV.TheCostPerformanceIndexis0.67,whichislessthan1.Yourprojectisearning0.67USDforevery1USDspentsincetheCPIislessthanone;theprojectisoverbudget.Theformula,informallyreferredtoasthe“PMPCostPerformanceIndex”givesdata-driveninsightintothebudget’shealth.Itdoesnotindicatetherootcauseforthebudgetvariancenorofferanyclueastotheneededorpossiblemitigation.OthertoolsandresourceswithinthePMBOK®GuideandPMIstandardsservethatpurposeforPMP®credentialholders.SchedulePerformanceIndex(SPI)andCPIAreviewoftheCPIisincompletewithoutaddressingtheSchedulePerformanceIndex(SPI).While,theCPIspeakstobudgetvariance,SPIprovidesinsightintoschedulevariance.ThereisaformulaspecifictotheSPIandthoseseekingtosuccessfullypassthePMP®examshouldknowhowtocalculatetheSPI.TheformulaforSPIusesEarnedValueandPlannedValue.TheSPIiscalculatedbydividingtheEVbyPV.TheresultingSPIvalueisinterpretedliketheCPIinitsvariancefrom1.<1=1>1BehindscheduleOnscheduleAheadofscheduleSchedulePerformanceIndexValueMeaningsSPIandCPIarekeycalculationsinEarnedValueManagementandarecriticalconceptsforthePMP®certificationexam. Althoughitshighlyunlikely,studentsmaybeaskedtodostraightforwardcalculationsofeithertheCPIortheSPIaspartofthePMP®exam,withnumbersnotnecessitatingtheuseofacalculator.Additionally,inboththecontextofthePMP®examsettingandlaterasanactivePMP®credentialholder,theProjectManagershouldbeabletointerpretwhattheCPIandSPImeantoaproject’sscheduleandbudgetrespectively.ThesmallbusinesswebsiteChronprovidesthisexampleofhowonedeterminestheSPIandCPIinagivensetting.“…aprojecthastwopeopleworkingfulltime,andthateachpersoncoststhecompany $1,250 aweek.Aprojectisoneweekbehindatthetimeofthecalculation.Oneweektimestwopeopleat $1,250 aweekequals $2,500,whichrepresentstheamountbywhichthescheduleisbehind.Ifthebudgetedcostofworkscheduledatthattimeis $6,000,yousubtractthe $2,500 fromthatcosttocomeupwiththebudgetedcostofworkperformedat $3,500.Dividing $3,500 by $6,000 producesanSPIof0.53.AswiththeCPI,SPIvaluesunder1arenotgoodbecausetheymeantheprojectisbehindschedule.Avalueof1meanstheprojectisonschedule,andavaluemorethan1meanstheprojectisaheadofschedule.”–Source:Chron.comTheSPIandCPIPMP®examquestionswillrequireknowledgeofhowtheformulasarecalculated,howtointerprettheresultingvalue,andhoweachisusedduringthelifeofaproject.CostFormulasforPMP®ExamPreparationThereare25formulasthatmaybeincludedorreferencedonthePMP®certificationexam,speakingtotherangeofknowledgeaprojectmanagerneedsinanybusinesssetting.TheCPIandSPIformulasdiscussedhereinarepartofwhatisknownasEarnedValuecalculations.InthePMIarticle“Howtomakeearnedvalueworkonyourproject,”thetoptenitemsforimplementingearnedvaluearelistedas:ProjectRequirementsWorkBreakdownStructureChangeManagementProcessIntegratedProjectPlanCorrectScheduleandBudgetScheduleandBudgetContingencyContingencyManagementCostCollectionSystemAccurateReportedProgressManagementSupportPreparationforthePMP®certificationexamshouldincludeEarnedValueformulasandtheirconnectiontoprojectmanagementprocesses,tools,knowledgeareas,andresources.PMP®CertificationExamCPISampleQuestionsQuestionABCD1.Youjustpickedupanewprojectfromadepartingprojectmanager.Youmeetwithherbeforeherdeparturetodiscusstheperformanceoftheproject.Shementionsthattheschedulehasbeenchallengingandhasusedfast-trackingtostayonschedule.Sheisunsureaboutthebudgetsinceon-timedeliverywasaprimaryconcern.ShetellsyouthatEVis20andACis$20.WhatisyourCPI?4121.252.Reportingtheprojectperformanceisarequiredtaskasperyourcontract.Youhavecalculatedearnedvaluemeasuresandreportthemtoyourstakeholders.BAC=$20,000;PV=$18,600;EV=$17,500;AC=$17,000;CPI=1.03;SPIis0.94;EACis$19,400;ETCis$2,400.Whatdothesefigurestellyouaboutyourprojectperformancetodate?ThebudgetatcompletionislessthantheestimateatcompletionsowewillspendmorethanweplannedandneedtogetapprovalYouarebehindscheduleandoverbudgetsoweneedtoestablishnewcostandschedulebaselinesimmediatelyTheestimateatcompletionisovertheoriginalbudgetThecostperformanceindextellsusthatwearegettingagoodreturnforthemoneyspentontheprojectsofarbutwearebehindscheduleStudyingforthePMPExam?PracticeQuestionsforPMPFormulasAnswersB.TheformulaforCPIisEV/AC.Inthiscase,thatis20/20,or1.0,andyouareonbudget.ChoiceDiscorrect.CPIgreaterthan1indicatesweareperformingbetterthanplannedwithregardtocosts,andanSPI<1indicateswearebehindschedule.ConclusionProjectmanagersshouldbeabletodetermineSPIandCPIfortheirprojects.Theformulaisstraightforward,andwithaccuratenumbers,canbecalculatedquickly.TheinterpretationoftheresultingfigureforbothSPIandCPIisrelativelysimple.Ittakesadepthofprojectmanagementexperienceandknowledgetoknowwhatactionstotakeandhowtousethesescheduleandcostinsightstomakeadjustmentsleadingtoprojectsuccess.UpcomingPMPCertificationTraining–Live&OnlineClassesNameDatePlacePMPCertificationTrainingJan24,25,26,278:30am-6:00pmBoston,MAViewDetailsPMPCertificationTrainingFeb12,13&19,208:30am-6:00pmBoston,MAViewDetailsPMPCertificationTrainingJan3-6&10-131:00pm-5:30pmOnline-UK/Ireland(GMT)ViewDetailsAbouttheauthorRelatedpostsMeganBellProjectManager&WriteratProjectManagementAcademyMeganBell#molongui-disabled-linkTheRiskReportinProjectManagementMeganBell#molongui-disabled-linkIntroductiontoEventandNon-EventRiskonthePMPExamMeganBell#molongui-disabled-linkIntrotoRiskAuditsinProjectManagementMeganBell#molongui-disabled-linkProbabilityofOccurrenceMeganBellPostnavigationUseYourPMP®CertificationToPrepareforProgramandPortfolioManagementTheExecutiveSponsorintheProjectEconomyReceiveournewslettertostayontopofthelatestpostsSearchfor:CategoriesAgileContinuingEducationCorporateTrainingDisciplinedAgileLeanSixSigmaPMBOKGuidePMI-ACPPMPCertificationPMPExamPrepPMPFor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