Suggested Answer:A🗳️
Cost performance index (CPI) is used to calculate performance efficiencies of project. It is used in trend analysis to predict future performance. CPI is the ratio of earned value to actual cost. 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. Incorrect Answers: B: CPI is the ratio of earned value to actual cost, i.e., CPI = Earned Value (EV) / Actual Cost (AC). C: Cost performance index (CPI) is used to calculate performance efficiencies of project and not its schedule. D: The CPI value of 1 indicates that the project is right on target.
Formula for Cost performance Indicator (CPI) = Earned Value (EV) / Actual Cost (AC)
For example, if a project has a earned value (EV) of £20,000 but actual costs (AC) were £12,000:., then CPI = EV / AC = 20,000 / 12,000 = 1.66
The cost performance index (CPI) is a measure of the financial effectiveness and efficiency of a project. It represents the amount of completed work for every unit of cost spent. If the ratio has a value higher than 1 then it indicates the project is performing well against the budget. A CPI of 1 means that the project is performing on budget. A CPI of less than 1 means that the project is over budget.
CPI = Earned Value divided by Actual Cost.
If CPI > 1.0 Project is under budget (performing well).
Why is CPI Important in CRISC?
Helps assess financial risks in IT and business projects.
Supports decision-making in cost control and budgeting.
Provides insights for improving risk mitigation strategies in project management.
The correct answer is A. If the CPI > 1, it indicates better than expected performance of the project.
The Cost Performance Index (CPI) is calculated as:
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=
Earned Value (EV)
Actual Cost (AC)
If CPI > 1, it indicates the project is performing better than expected in terms of cost.
If CPI = 1, the project is on budget.
If CPI < 1, it signifies cost overruns.
It is specifically used to measure cost efficiency, not schedule performance.
The answer is B
The cost performance index (CPI) is a measure of the conformance of the actual work completed (measured by its earned value) to the actual cost incurred: CPI = EV / AC.
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