How to Calculate and Interpret Cost Performance Index (CPI)
A project is 60% complete. The earned value (EV) is $120,000, the planned value (PV) is $150,000, and the actual cost (AC) is $130,000. What is the cost performance index (CPI) and what does it indicate?
Quick Answer
The answer is a CPI of 0.92, which indicates the project is over budget. This is calculated by dividing the earned value (EV) of $120,000 by the actual cost (AC) of $130,000, yielding 0.92. The cost performance index measures the cost efficiency of the work completed, and any value below 1.0 means the project is spending more than planned for the value earned. On the PMP exam, this calculation tests your ability to apply earned value management (EVM) formulas quickly, often in scenario-based questions where you must interpret the result, not just compute it. A common trap is confusing CPI with SPI or misreading AC as PV; remember that CPI focuses on cost, so the denominator is always actual cost. For a quick memory tip: think of CPI as “Costs are Painful if Index is less than 1”—if it’s below 1.0, you’re in the red.
⚠ Common exam trap
It's easy for candidates to confuse CPI with SPI — candidates often see a value less than 1 and incorrectly assume it indicates schedule delay, but CPI specifically measures cost performance, not schedule performance.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
CPI = 0.92; the project is over budget
The Cost Performance Index (CPI) is calculated as EV/AC = $120,000 / $130,000 = 0.92. A CPI less than 1.0 indicates that the project is over budget, meaning for every dollar spent, only $0.92 of value is earned. Option D correctly identifies both the CPI value and the over-budget status.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
CPI = 0.80; the project is under budget
Why it's wrong here
CPI is EV divided by AC, giving 120,000/130,000 = 0.92, so 0.80 is arithmetically wrong; a CPI below 1.0 also means over budget, not under. It is tempting because dividing EV by PV yields 0.80, which is the schedule performance index.
- ✗
CPI = 1.08; the project is under budget
Why it's wrong here
CPI is EV divided by AC, giving 120,000 ÷ 130,000 = 0.92, so the project is over budget. Dividing AC by EV inverts the ratio, producing 1.08. The CPI formula itself is the axis of difference, not the interpretation.
- ✗
CPI = 0.92; the project is behind schedule
Why it's wrong here
CPI is EV divided by AC, giving 120,000/130,000 = 0.92, but that value indicates cost overrun, not schedule slippage; schedule status comes from SPI (EV/PV = 0.80). It is tempting because 0.92 is the correct CPI figure, yet the interpretation attached is wrong.
- ✓
CPI = 0.92; the project is over budget
Why this is correct
CPI equals EV divided by AC, so 120,000 divided by 130,000 gives 0.92. A CPI below 1.0 means each dollar spent delivers less earned value than planned, confirming the project is running over budget for the work completed so far.
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Same concept, more angles
2 more ways this is tested on PMP
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. Your project is 40% complete, but the Earned Value (EV) is $50,000, Planned Value (PV) is $60,000, and Actual Cost (AC) is $70,000. The cost performance index (CPI) is 0.71, and the schedule performance index (SPI) is 0.83. What is the most likely impact on the project?
medium- A.The project is under budget but behind schedule
- B.The project is under budget and ahead of schedule
- C.The project is over budget but ahead of schedule
- ✓ D.The project is over budget and behind schedule
Why D: With a CPI of 0.71 (less than 1.0), the project is over budget because for every dollar spent, only $0.71 of earned value is received. With an SPI of 0.83 (less than 1.0), the project is behind schedule because only 83% of the planned work has been completed. Therefore, the project is both over budget and behind schedule, making option D correct.
Variation 2. Your project's Earned Value (EV) is $45,000, Planned Value (PV) is $50,000, and Actual Cost (AC) is $55,000. The project is at the midpoint. What is the most accurate assessment of the project's status?
medium- A.The project is ahead of schedule and under budget
- B.The project is behind schedule and under budget
- C.The project is on schedule and over budget
- ✓ D.The project is behind schedule and over budget
Why D: With EV=$45,000, PV=$50,000, and AC=$55,000, the Schedule Performance Index (SPI = EV/PV) is 0.90, indicating the project is behind schedule. The Cost Performance Index (CPI = EV/AC) is approximately 0.818, showing the project is over budget. Since both SPI and CPI are less than 1.0, the correct assessment is behind schedule and over budget, which matches option D.
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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