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CAPM Practice: Determine how to document project controls of predictive, plan-based projects

Question 14 of 85 in Determine how to document project controls of predictive, plan-based projects

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A project manager reviews a project report and finds: BAC = $500,000, AC = $300,000, EV = $250,000. What is the CPI and what does it mean for the project forecast?

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Correct answer: CPI = 0.83 — for every dollar spent, $0.83 of value is earned; if this continues, EAC ≈ $602,000

Explanation

CPI = EV/AC = $250,000/$300,000 = 0.833. This means for every dollar spent, only $0.83 of value is earned — the project is over budget. If this rate continues: EAC = BAC/CPI = $500,000/0.833 = ~$600,600. The project is forecasted to overrun its budget by approximately $100,000 if current cost performance continues.

**Why not A:** CPI = 1.2 would require EV/AC = $250,000/$300,000, which equals 0.83, not 1.2. This answer both miscalculates the CPI and incorrectly states the project is under budget. The actual CPI of 0.83 indicates an over-budget condition.

**Why not C:** CPI = 0.5 would require EV/AC to equal 0.5, meaning AC would need to be $500,000 for EV of $250,000. The actual AC is $300,000, yielding CPI = 0.83. Additionally, CPI does not directly measure percent complete of planned work.

**Why not D:** CPI = 1.0 would mean EV equals AC, indicating perfect cost efficiency. With EV = $250,000 and AC = $300,000, these values are clearly not equal. The project has spent $50,000 more than the value of work accomplished.

Key Concept

This question covers Determine how to document project controls of predictive, plan-based projects under Determine how to document project controls of predictive, plan-based projects (Predictive, Plan-Based Methodologies).

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