What Is Cost Performance Index (CPI)? EDGEBIC Definition

Cost Performance Index (CPI) is the ratio of earned value to actual cost (EV divided by AC) that tells you how efficiently a job is spending its hours. A CPI of 1.0 means every hour worked earns exactly one hour of planned value; below 1.0 the job is over budget, burning more hours than the completed work is worth; above 1.0 it is under budget. CPI is the cost twin of Schedule Performance Index, and the two are meant to be read together.

This entry is part of the EDGEBIC by User Solutions glossary series; for the broader vocabulary of planning, see the manufacturing glossary.

How CPI Works

Earned Value Management measures three quantities per job. Earned value (EV) is the planned hours' worth of work actually completed. Actual cost (AC) is the hours truly logged against the job. Planned value (PV) is the work scheduled to be done by now. CPI divides earned value by actual cost, so it answers a single question: for every hour of effort spent, how much planned value came back?

A CPI of 1.0 is the break-even line. A job at 0.90 is spending ten percent more effort than the work is earning; a job at 1.10 is beating its budget. Because EV and AC are both in hours, CPI is a clean ratio that scales across jobs of any size.

CPI and SPI can point in opposite directions, and that is the useful part. A job can finish its early steps fast (SPI above 1.0, ahead of schedule) while consuming extra setup and rework hours (CPI below 1.0, over budget). Neither index alone tells the whole story, which is why EDGEBIC puts them in adjacent columns.

A Concrete Example

Take job J-100, product Widget A, budgeted at 50 hours across five steps. By the report cut-off, the shop has logged actual hours as follows.

Budget at Completion is 50 hours. Actual hours logged total 10 + 11 + 30 + 4 = 55. Because 55 exceeds the 50-hour budget, percent complete caps at 100 and earned value equals 50 hours.

CPI = EV divided by AC = 50 divided by 55 = 0.91.

The job is spending about ten percent more effort than the work is worth. Feeding that into the forward projection: Estimate at Completion = AC + (BAC minus EV) divided by CPI = 55 + (50 minus 50) divided by 0.91 = 55 hours. Variance at Completion = BAC minus EAC = 50 minus 55 = minus 5 hours. The job is forecast to close 5 hours over budget.

How EDGEBIC Computes and Shows CPI

CPI appears in the Earned Value (EVM) report alongside SPI, EAC, and VAC. EDGEBIC computes it per scheduled job from the same pipeline: sum the schedule durations for BAC, clip to the cut-off for PV, sum the logged hours for AC, then derive earned value from percent complete. Two behaviors matter in practice:

• CPI defaults to 1.0 when actual cost is zero. A job with no hours logged has nothing to measure, so the report shows 1.0 rather than an error. It is a placeholder, not a compliment.
• Currency columns follow the same math in dollars. If any work center on the job carries an hourly rate, the pane also shows BAC$, AC$, EV$, and EAC$, computed by multiplying hours by the rate. When every rate is zero (the default), those columns hide automatically, so shops that track hours but not cost see a clean grid.

Every column is documented in place: click Column Details on the pane and the CPI row shows its formula and worked interpretations, part of the self-explaining reports system. For the full report inventory, see the EDGEBIC reports guide; to answer the delivery question that sits beside cost, the reports that answer "are we on time" cover the schedule side.

Read CPI with SPI and with the underlying earned value it is built from, and the three together give a job's full time-and-cost health in one glance.