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PMP Practice: Communicate Change Status

Question 3 of 8 in Manage and Control Changes

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Sahar Mohammadi is managing a hybrid project for Coral Reef Fintech to develop a cloud-based inventory platform. The project uses time-boxed sprints for development work and predictive scheduling for infrastructure deployment. The project budget is $480,000 with a planned 12-month duration. At the 6-month status review, the finance controller reports that $276,000 has been spent. Sahar's team has completed work originally estimated to cost $264,000. The project baseline called for $240,000 worth of work to be completed by this point. A major stakeholder now wants to add a real-time analytics dashboard, estimated to cost $72,000 and requiring 8 additional weeks. Before presenting this change request to the change control board, Sahar needs to calculate the project's current cost performance index (CPI) to contextualize the financial impact of the proposed change. What is the CPI?

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Correct answer: 0.96

Explanation

The cost performance index (CPI) measures cost efficiency by comparing the value of work completed to the actual cost incurred. The formula is CPI = Earned Value (EV) ÷ Actual Cost (AC). From the scenario: EV = $264,000 (value of work completed) and AC = $276,000 (actual expenditure). Therefore, CPI = $264,000 ÷ $276,000 = 0.96 (rounded to two decimal places). This indicates the project is spending approximately $1.04 for every dollar of value delivered, meaning cost performance is slightly under target. Understanding the current CPI is essential before proposing the change because the change control board needs to assess whether adding $72,000 to a project already experiencing cost overruns is financially sustainable. In a hybrid environment, financial governance remains critical even when using adaptive approaches for portions of the work, and baseline performance metrics inform change approval decisions.

**Why not A:** A CPI of 1.15 would indicate the project is delivering $1.15 of value for every dollar spent—a cost-favorable position. This could result from inverting the formula and dividing actual cost by earned value ($276,000 ÷ $264,000 ≈ 1.045) or from using incorrect figures entirely. The project has spent more than it has earned in value, so a CPI above 1.0 is inconsistent with the scenario data and would give the change control board a falsely optimistic picture of financial performance.

**Why not C:** A CPI of 0.87 would indicate more severe cost overperformance than the data supports, suggesting the project is only delivering $0.87 of value per dollar spent. This could result from confusing the earned value with the planned value (PV = $240,000 ÷ AC = $276,000 ≈ 0.87), which compares what was planned to be done against what was spent rather than what was actually accomplished against what was spent. Using PV instead of EV misapplies the earned value formula.

**Why not D:** A CPI of 1.10 is directionally incorrect—it implies cost efficiency above 1.0, meaning the project is under budget on a per-unit-of-value basis, which contradicts the scenario where actual costs ($276,000) exceed earned value ($264,000). This figure might arise from applying an incorrect ratio, perhaps dividing the planned value by earned value or making a computational error that inverts the relationship between spending and value delivery.

Key Concept

This question covers Communicate Change Status under Manage and Control Changes (Business Environment).

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