PMI Risk Management Professional Practice Exam

A cost performance index (CPI) of 0.75 indicates what about the project?

1. The project is behind schedule

2. The project is under budget

3. The project is over-budget to date

4. The project is on track

The correct answer is: The project is over-budget to date

A cost performance index (CPI) is a measure used in project management to evaluate the cost efficiency and financial health of a project. It is calculated by dividing the earned value of work performed by the actual costs incurred. A CPI value less than 1, such as 0.75, indicates that the project is not delivering value commensurate with the expenditures made to date. In this case, a CPI of 0.75 means that for every dollar spent, the project is only earning 75 cents in value. This clearly signifies that the project is over-budget, as the actual costs are greater than the value of work accomplished. Therefore, this is why the choice indicating that the project is over-budget to date is the correct response. A CPI below 1 indicates the project is facing cost overruns, which is a critical insight for project managers to address issues and take corrective actions to bring the project back on track financially.