Question

In Earned Value Management, what specific index is calculated to show how efficiently the project is utilizing its budget?

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The specific index calculated in Earned Value Management to show how efficiently the project is utilizing its budget is the Cost Performance Index (CPI). The Cost Performance Index (CPI) measures the cost efficiency of the work completed. It is calculated by dividing Earned Value (EV) by Actual Cost (AC). Earned Value (EV) represents the budgeted cost of the work actually performed to date. It is the value of the work completed, expressed in the currency of the budget. For example, if a task budgeted at $1,000 is 60% complete, its Earned Value is $600. Actual Cost (AC) is the total cost incurred and recorded for the work performed to date. It is the actual amount of money spent. For example, if the 60% complete task actually cost $750 to get to that stage, its Actual Cost is $750. The CPI then shows how much value is being received for each unit of cost expended. A CPI greater than 1.0 indicates that the project is performing under budget for the work accomplished, meaning it is more cost-efficient than planned (e.g., a CPI of 1.2 means $1.20 worth of work is earned for every $1.00 spent). A CPI equal to 1.0 indicates that the project is performing exactly on budget. A CPI less than 1.0 indicates that the project is performing over budget for the work accomplished, meaning it is less cost-efficient than planned (e.g., a CPI of 0.8 means only $0.80 worth of work is earned for every $1.00 spent).

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In Earned Value Management, what specific index is calculated to show how efficiently the project is utilizing its budget?

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