Which metric indicates cost efficiency by comparing earned value to actual cost?

Which metric indicates cost efficiency by comparing earned value to actual cost?

• A. Schedule Performance Index
• B. Schedule Variance
• C. Cost Variance
• D. Cost Performance Index

Answer: (D)

Cost Performance Index measures cost efficiency by comparing earned value to actual cost. In earned value management, earned value (EV) represents the value of work actually completed, based on the budgeted cost for that work, while actual cost (AC) is what was spent. The CPI is calculated as EV divided by AC. When CPI is greater than 1, you’re delivering more value per dollar than planned, signaling good cost efficiency; when CPI is less than 1, you’re spending more than the value of the work completed, indicating cost overruns; a CPI of 1 means you’re exactly on budget. This focus on the ratio of value earned to cost incurred distinguishes it from cost variance (which is just EV minus AC) and from schedule-focused metrics that look at time rather than cost.

Cost Performance Index measures cost efficiency by comparing earned value to actual cost. In earned value management, earned value (EV) represents the value of work actually completed, based on the budgeted cost for that work, while actual cost (AC) is what was spent. The CPI is calculated as EV divided by AC. When CPI is greater than 1, you’re delivering more value per dollar than planned, signaling good cost efficiency; when CPI is less than 1, you’re spending more than the value of the work completed, indicating cost overruns; a CPI of 1 means you’re exactly on budget. This focus on the ratio of value earned to cost incurred distinguishes it from cost variance (which is just EV minus AC) and from schedule-focused metrics that look at time rather than cost.