Cost Performance Index (CPI)
The Cost Performance Index, or CPI, tells you how efficiently your project is turning money into completed work. To understand it, you need two terms. "Earned Value" (EV) is the value of the work you have actually finished, measured in money — for example, if you've completed a job that was budgeted at ₹100, your EV is ₹100. "Actual Cost" (AC) is the real money you spent to do that work. CPI is simply EV divided by AC.
Reading the result is easy once you know the meaning. CPI is the amount of value you get for every ₹1 you spend. A CPI above 1 means good news — you're getting more than ₹1 of work done for every ₹1 spent, so you're under budget. A CPI below 1 means you're spending more than the work is worth, so you're over budget. A CPI of exactly 1 means you're spending precisely as planned.
A project manager uses CPI to answer the question "Are we getting our money's worth?" It's one of the most watched numbers on a project because it quickly reveals cost trouble long before the money runs out. Because it's a ratio, it also lets you compare cost efficiency fairly across projects of very different sizes.
Think of it like fuel mileage for your project's money. Just as a car's mileage tells you how many kilometres you get per litre of petrol, CPI tells you how much finished work you get per rupee. Above 1 is a fuel-efficient project; below 1 means your money is burning faster than it should.
Suppose your project plan said the work you've done so far should cost ₹80,000 — that budgeted value of completed work is your Earned Value (EV = ₹80,000). But your team actually spent ₹1,00,000 to get there — that's your Actual Cost (AC = ₹1,00,000). CPI = EV ÷ AC = 80,000 ÷ 1,00,000 = 0.8. This means for every ₹1 you spend, you're only getting ₹0.80 of real value — you're over budget and running at 80% cost efficiency.
Every PMP formula explained free — plus worked examples and practice in PMP Math, and full timed mocks in the simulator.