Cost Performance Index (CPI): CPI is a measure of cost efficiency on a project, indicating how well the project is performing in terms of its budget.

The Cost Performance Index (CPI) is a critical metric in project management used to evaluate the cost efficiency of a project. It is defined as the ratio of earned value (EV) to actual cost (AC). Here’s the formula:

$\text{CPI} = \frac{EV}{AC}$

Where:

• Earned Value (EV) is the value of the work actually performed up to a certain point.
• Actual Cost (AC) is the total cost incurred for that work up to the same point.

Interpretation:

• A CPI of 1 indicates that the project is on budget.
• A CPI greater than 1 indicates that the project is under budget (cost-efficient).
• A CPI less than 1 indicates that the project is over budget (cost-inefficient).

Importance:

Monitoring the CPI throughout the project helps project managers make informed decisions about resource allocation and adjustments needed to keep the project within budget.