Cost Performance Index

The cost performance index, also referred to by the abbreviation (CPI), refers specifically to a method, chart, or other instrument that is implemented for the purposes of determining/measuring the actual cost efficiency of a project. The cost performance index is determined by measuring the ratio of earned value (also known by the abbreviation of EV) to actual costs (also known by the abbreviation of AC).The equation to determine the cost performance index can be derived by the following equation: CPI=EV divided by AC. If the resulting value is greater than one indicates that the conditions of cost efficiency for the project are considered to be favorable. A resulting value that is less than one indicates that the conditions of cost efficiency for the project are considered to be less than favorable. The cost performance index can change over the life of a project depending on the ways in which the earned values and actual cost have changed.