Essential Mathematical Formulas for PMP Certification Test
A = B + C
Example
Assume you’re planning a home improvement project. You projected the project’s cost to be $10,000, but as it advances, you examine how effectively you’re spending money in comparison to the plan.
Let’s dissect it:
– Budgeted cost at a specific point: $8,000
– At that time, the actual cost was $7,000
The Cost Performance Index (CPI) formula is: [CPI = fractextEarned Value (EV)textActual Cost (AC) ]
Where: – **Earned worth (EV)** denotes the worth of work accomplished at that point.
– **Actual Cost (AC)** is the cost incurred at that point in time.
As a result, in this case:[CPI = frac $8,000 $7,000 = 1.14]
A CPI larger than one (in this case, 1.14), implies that you are managing expenses more efficiently than intended. For every dollar invested, you receive more value or labor done than you expected. It implies effective cost management.
A CPI less than one indicates that you are spending more than expected for the task done, indicating possible cost overruns or inefficiencies in expenditure.
