PMP Process — Managing Technical Aspects Practice Question
You are managing a software development project using a predictive approach. The project has a total budget of $500,000 and is expected to last 12 months. After 6 months, you have completed 40% of the work, and the actual cost incurred is $220,000. What is the Cost Performance Index (CPI) and what does it indicate about the project's cost efficiency?
⚠ Common exam trap
Many candidates confuse CPI with SPI or miscalculating EV as a percentage of the total budget without applying it correctly.
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 = 0.91, indicating the project is over budget.
The Cost Performance Index (CPI) measures cost efficiency by comparing earned value to actual cost. With EV = $200,000 and AC = $220,000, CPI = 0.91, which is below 1, indicating the project is over budget. This metric helps the project manager assess whether the project is delivering value for the money spent and take corrective action if needed.
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 = 0.91, indicating the project is over budget.
Why this is correct
CPI is calculated as Earned Value (EV) divided by Actual Cost (AC). Here, EV is 40% of $500,000 = $200,000, and AC is $220,000, so CPI = 200,000 / 220,000 ≈ 0.91. A CPI less than 1 means the project is getting less value for each dollar spent, thus it is over budget. This is the correct interpretation.
- ✗
CPI = 0.83, indicating the project is over budget.
Why it's wrong here
A CPI of 0.83 would result if EV were $200,000 and AC were $240,000, but AC is given as $220,000. While the conclusion of being over budget is correct, the numerical value is wrong, making this option inaccurate.
- ✗
CPI = 1.10, indicating the project is under budget.
Why it's wrong here
This would be the case if EV were greater than AC, but here EV is $200,000 and AC is $220,000, so CPI is less than 1. A CPI of 1.10 would imply cost efficiency, but the project is actually overspending. The calculation is incorrect for this scenario.
- ✗
CPI = 1.25, indicating the project is under budget.
Why it's wrong here
CPI of 1.25 would be calculated if EV were $250,000 and AC were $200,000, but those are not the figures. This option incorrectly suggests cost efficiency when the project is actually over budget. The CPI must be derived from the given EV and AC.
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Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official PMI exam blueprint
This PMP practice question is part of Courseiva's free PMI certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the PMP exam.