Cost Performance Index |
This guideline describes how to use a Cost Performance Index (CPI) to measure how effective you are managing the cost.
Main Description
### Overview The Cost Performance Index (CPI) measures how effectively you are managing the cost in an iteration or a project This helps you see the trend of spending compared to the budget in the plan. #### Measurement Method CPI = Earned Value / Actual Cost Earned Value = Value of completed work items to date in terms of the budget assigned to the work item. It can be referred as the budgeted cost of work performed (BCWP) Actual Cost = Total costs actually spent in completed work items to date. Cost can be cost (dollars) or effort (person-hours). ### Measurement Analysis CPI indicates the value that you are getting from a dollar or effort that you spend. CPI should be as close to one as possible. If the CPI is more than one, it indicates a favorable condition, which shows that the team is getting more value than they have planned to expect. If the CPI is lower than one, that indicates an unfavorable condition. As the following table shows, at the end of Week 4 (9/26/2008), the team planned to have completed 48 hours of work, but they completed only 36 hours of work. Thus, the work took four hours more than they expected. That makes the CPI of this project 0.9 (36/40). This indicates that for every hour you have spent on the project, you completed only 0.9 hours of work. Therefore, this is an unfavorable result and might mean that you have gone over your budget.
Dates | Plan Value (person-hours) | Earned Value (person-hours) | Actual Cost (person-hours)
09/05/2008 | 6 | 6 | 6
09/12/2008 | 20 | 20 | 20
09/19/2008 | 32 | 32 | 32
09/26/2008 | 48 | 36 | 40
10/3/2008 | 87 |  |
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