Cpi stands for cost performance index

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Reference no: EM133770340

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How would a project manager use the CPI? CPI stands for cost performance index. It is used to calculate a project's financial effectiveness and cost efficiency. The following calculation is used: CPI = Earned Value / Actual Cost When the CPI ratio has a value higher than 1, that means that the project is performing well from a budget perspective. However, if the CPI value is less than 1, the project is over budget. When the project is performing at budget, the CPI value will be 1. The CPI is the widely used and most accepted performance index (Larson, n.d.). Historically, this data has shown that it is the most accurate, reliable and stable measurement. It is essential for a project manager to monitor the CPI because it can provide an early warning signal for potential budget overruns. The project manager can use that information to make project budget or scope adjustments. Additionally, CPI can be used as a basis for forecasting costs at the completion of a project. This can be helpful to project managers who need to estimate future project costs and may need to communicate these forecasts to management or ask for more budget or reduce future scope.

Reference no: EM133770340

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