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Exam Code: B3

Exam Name: Health and Welfare Plans - Plan Types and Administration

Version: V15.35

Q & A: 208 Questions and Answers

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Billy is the project manager of the PQW Project and she has an assigned project budget of $655,000. Currently she is 80 percent complete with the project though she was scheduled to be 90 percent done by this date. She has spent $490,000 to date. What should Billy report as her cost performance index (CPI)for this project?
A. $34,000
B. .89
C. 1.07
D. .07
Answer: C
Cost performance index (CPI) is used to calculate performance efficiencies. It is used in trend analysis to predict future performance. CPI is the ratio of earned value to actual cost. The CPI is calculated based on the following formula: CPI = Earned Value (EV) / Actual Cost (AC) If the CPI value is greater than 1, it indicates better than expected performance, whereas if the value is less than 1, it shows poor performance. The CPI value of 1 indicates that the project is right on target. In this instance the earned value is $524,000 and the actual costs are $490,000. In this project Billy has spent less than what the work is worth - a good thing. This could be because of a cost savings, such as travel or shipping, or because a risk event didn't come into play. This causes the positive CPI - something which does not happen very often. Answer option A is incorrect. .07 is an incorrect calculation for the cost performance index for the project. Answer option D is incorrect. .89 represents the schedule performance index. Answer option C is incorrect. $34,000 is the cost variance of the project.

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