- Project Management Terms
- Agile - The Definition of Continuous Change
- Servant Leadership - A Key Leadership Style in Agile
- 6 Steps to making reasonable decisions
- What is the BOSCARD method
- PEST Analysis: How Political, Economic, Social, and Technological Factors Impact Your Business
- 49 Processes in Project Management
- What is Aggregate Planning in Project Management?
- 25 PMP Formulas you must remember to pass the PMP exam
- Example with formulas Earned Value, Cost Variance and Schedule Variance
- Example with formular Cost Performance Index (CPI), Schedule Performance Index (SPI) and Estimate at Completion (EAC)
- Example with formulas Beta Value in PERT, Expected Monetary Value (EMV) and Risk Priority Number
- Example with formular Variance at Completion, Estimate to Complete (ETC) and To Complete Performance Index (TCPI)
- Example with formular Standard Deviation, Communication Channels and Cost plus Percentage of Cost
- Example with formular Cost plus Fixed Fee, Cost plus Award Fee and Cost plus Incentive Fee
- Example with formular Return on Investment (ROI), Payback Period and Cost Benefit Ratio
- Example with formular Present Value (PV), Future Value (FV), Target Price and Point of Total Assumption
- Kanban Board - Agile Project Chart
- Gantt Chart - Roadmap Project Chart
- What is a Timeline View in Project Management?
- PERT Chart - The Most Popular Project Management Diagram
- Work-Breakdown Structure (WBS) Chart
- Flowchart in Project Management
- Cause-Effect Project Charts - Fishbone Diagram
- Burn-up and Burn-down Project Charts
- Bar Chart in Project Management
- What is Pareto Chart
- What is Pie Chart
- What is Control Chart
- What is Matrix Diagram
- What is Critical Path Diagram
- What is Cumulative Flow Project Chart
- What is Enterprise Environmental Factors
- What is Arrow Diagramming Method (ADM)
- What is Cost Baseline
- What is Cost-Benefit Analysis
- What is Cost Engineering?
- What is Cost Management Plan
- What is Cost of Quality?
- What is Cost Overrun?
- What is Cost Performance Index?
- What is Cost Plus Fixed Fee Contract?
- What is Cost Plus Incentive Fee Contract?
- What is Cost Plus Percentage Of Cost Contract
- What is Cost Reimbursable Contract?
Example with formular Cost Performance Index (CPI), Schedule Performance Index (SPI) and Estimate at Completion (EAC)
7. Cost Performance Index (CPI)
Formula CPI = Earned Value / Actual Cost
The Cost Performance Index measures the cost efficiency of the project in utilizing the funds invested in it. It is calculated through dividing earned value by actual cost. A higher CPI means that you are exceeding your budget.
A CPI of greater than 1 shows a greater cost efficiency. If the Earned value is calculated at $15,000 and the Actual cost incurred is $10,000 then we would calculate CPI as
Earned Value /Actual Cost
=15000/10000 = 1.5
This denotes a high cost-efficiency in the project.
8. Schedule Performance Index (SPI)
SPI PMP Formula:
SPI = Earned Value/Planned value
The Schedule Performance Index measures how well the project schedule is holding up against the original project plan. If the SPI is at 1, it means you are on schedule, if it is more than 1 it means you are ahead of schedule, and an SPI value that is under 1 means you are behind schedule.
Let’s imagine you have an earned value of $7,500 and a planned value of $10,000
In this case your SPI would be calculated as
Earned Value / Planned Value
7500/10000 = 0.75
This denotes that your project is running behind schedule.
9. Estimate at Completion (EAC)
EAC PMP Formula:
EAC = Budget at Completion / Cost Performance Index
EAC = Actual Cost + Bottom –up Cost to Complete
EAC = Actual Cost + (Budget at Completion – Earned Value)
EAC = Actual Cost + [(Budget at Completion – Earned Value) / (Cost performance Index x Schedule Performance Index)]
Estimate at Completion is the revised estimate of the budget needed for completing the project. This may change from the original budget through additional costs or a change in prices or other unforeseen variables.
Let’s assume that the budget at completion is $20000 and the CPI is at 0.75.
In this case you would calculate EAC as
Budget at Completion / Cost Performance Index
20000/0.75 = 26,667
This means that you will need an extra $6,667 to complete the project at the current level of cost efficiency.