Definition
The Cost Performance Index (CPI) is a key project management metric that measures the financial efficiency of a project. It is calculated by dividing the Earned Value (EV) by the Actual Cost (AC). A CPI greater than 1 indicates the project is under budget, while a CPI less than 1 signifies it is over budget. Understanding CPI allows project managers to assess if they are getting the most value for the money spent. For instance, a CPI of 0.8 means the project is only earning 80 cents for every dollar spent. A common mistake is confusing CPI with the Schedule Performance Index (SPI), which measures schedule efficiency. CPI is a critical concept tested on the PMP, CAPM, and PMI-ACP examinations.