What is cost performance meaning?
The cost performance index (CPI) is a measure of the financial effectiveness and efficiency of a project. It represents the amount of completed work for every unit of cost spent. As a ratio it is calculated by dividing the budgeted cost of work completed, or earned value, by the actual cost of the work performed.
How do you measure cost performance?
The Cost Performance Index (CPI) is a method for calculating the cost efficiency and financial effectiveness of a specific project through the following formula: CPI = earned value (EV) / actual cost (AC). A CPI ratio with a value higher than 1 indicates that a project is performing well budget-wise.
What does performance cost ratio mean?
The cost-performance ratio is an equation used to balance the cost of an item against its effectiveness. This process can help buyers with making purchasing decisions by assigning rankings to a series of items based on a variety of factors. Cost-performance can also be used to analyze trends in production.
What does a CPI of 1 indicates?
A CPI of 1 means that the project is performing on budget. A CPI of less than 1 means that the project is over budget.
What is BAC in project management?
Budget at Completion (BAC) is a measure that is often used in earned value management to track the actual cost of a project against its forecasted budget. It is calculated at the start of a project based on the project work and its individual components.
What is SPI and CPI?
The Cost Performance Index (CPI) is defined as the ratio of Earned Value to Actual Cost, while the Schedule Performance Index (SPI) is defined as the ratio of cumulative Earned Value to cumulative Planned Value (PMI, 2000). Both CPI and SPI are traditionally defined in terms of the cumulative values.
What is a good SPI?
The CPI is only one aspect of determining the progress of a project. As with the CPI, SPI values under 1 are not good because they mean the project is behind schedule. A value of 1 means the project is on schedule, and a value more than 1 means the project is ahead of schedule.
What is BC ratio economics?
A benefit-cost ratio (BCR) is an indicator showing the relationship between the relative costs and benefits of a proposed project, expressed in monetary or qualitative terms. If a project has a BCR greater than 1.0, the project is expected to deliver a positive net present value to a firm and its investors.
What does a 1.2 CPI mean?
Understanding the Cost Performance Index If the result is more than 1, as in 1.25, then the project is under budget, which is the best result. A CPI of 1 means the project is on budget, which is also a good result. A CPI of less than 1 means the project is over budget.
What is a good CPI?
Among the general public, the CPI is often seen as a barometer of overall economic health, with most commentators preferring a low to moderate CPI in the 2% to 3% range.
What is the cost of performance?
Cost Performance. Cost performance is defined as the zero difference between the budgeted/original cost estimate of the project and in some cases spending below the estimated cost of the project. Cost variance occurs when there is an excess of actual cost over budget or below budget.
What is total cost performance index?
Cost performance index is a project metric calculated as the ratio of earned value to actual cost.Earned value is defined as the authorized budget for work completed for a project. Actual cost represents the total project expenditures to date.
What is cost schedule performance?
The Cost Schedule Performance Index ( CSI ) is an automatic calculation which combines the Cost Performance Index ( CPI ) and Schedule Performance Index (SPI) into one general metric that balances cost and schedule. By multiplying these values together, a single metric can account for a protracted schedule at a lower budget or vice versa.
